M/S. Apco Arasavalli Expressway Pvt. ... vs The Additional Gommissioner Of State ... on 11 September, 2024
AI Legal Insights
This GST case law from the Andhra Pradesh High Court addresses the crucial issue of determining the "time of supply" for Goods and Services Tax (GST) on annuity payments received under Hybrid Annuity Mode (HAM) contracts. The court considered WRIT PETITION NO: 17225/2023 and ruled against the tax department, setting aside assessment orders that demanded GST upfront. The ruling mandates adherence to CBIC Circular No. 221/15/2024-GST, ensuring GST is levied upon invoicing or payment receipt, not at the start of the concession period. This case provides clarity on GST obligations for infrastructure projects and potential GST refunds.
This ruling provides relief to concessionaires operating under Hybrid Annuity Mode (HAM) contracts by clarifying the timing of GST liability on annuity payments. Taxpayers benefit from the application of the CBIC circular, preventing premature GST demands, while the department must now adhere to the clarified guidelines.
- GST on HAM annuity payments is governed by CBIC Circular No. 221/15/2024-GST.
- Tax is payable upon invoicing or receipt of payment, not at the concession's inception.
- Erroneous assessments demanding GST upfront are invalid.
- Excess tax collected under the set-aside orders must be refunded.
- This ruling impacts GST liability for infrastructure projects under HAM contracts.
QWhen is GST payable on HAM annuity payments?
GST on annuity payments received under a Hybrid Annuity Mode (HAM) contract is payable at the time of invoicing or receipt of payment, as clarified by CBIC Circular No. 221/15/2024-GST.
QWhat is CBIC Circular No. 221/15/2024-GST?
CBIC Circular No. 221/15/2024-GST provides clarification on the time of supply for GST purposes concerning annuity payments received by concessionaires under Hybrid Annuity Mode (HAM) contracts for infrastructure projects.
Ruling Summary
Here's a summary of the judgment:
1. Outcome
The Andhra Pradesh High Court allowed the Writ Petitions, setting aside the impugned assessment orders and appellate orders. The respondent authorities were directed to collect tax in accordance with Circular No. 221/15/2024-GST dated 26.06.2024, issued by the Central Board of Indirect Taxes and Customs (CBIC). Any amounts recovered based on the set-aside orders are to be refunded to the petitioner.
2. Core Issue
The central issue was to determine the "time of supply" for the purpose of Goods and Services Tax (GST) liability on annuity payments received by a concessionaire under a Hybrid Annuity Mode (HAM) contract for the construction and maintenance of a National Highway. Specifically, whether GST is payable on annuity installments at the inception of the concession period or at the time of invoicing or receipt of payments.
3. Key Facts
- Petitioner: M/s. Apco Arasavalli Expressway Private Limited, engaged in road construction, registered under GST.
- Project: Construction and maintenance of a section of National Highway No.16 (approx. 54.19 km) under NHDP Phase-V on a Hybrid Annuity Mode (HAM).
- Agreement: Concession Agreement dated 18.01.2018 with the National Highway Authority of India (NHAI).
- Contract Terms: Petitioner to design, build, operate, and transfer the highway (DBOT Annuity/Hybrid Annuity) over a 15-year concession period. Consideration included payments during the construction period (GST paid thereon) and subsequent annuity payments for the concession period.
- Dispute: While GST on construction payments was settled, a dispute arose regarding the time of GST liability on the annuity payments.
- Assessment & Appeal: The assessing authority passed assessment orders for periods 2017-18 to 2020-21, April 2022 to November 2022, and April 2021 to March 2022, demanding GST on annuity payments. The Appellate Authority dismissed the appeals, leading to the present Writ Petitions.
4. Arguments
- Taxpayer (Petitioner): Contended that GST on annuity payments would be payable only on the date the invoice is raised by the petitioner for such purpose or when payment is made, whichever is earlier.
- Revenue (Respondents): Took the view that GST is payable on all annuity installments at the very inception of the concession period, and the payment of GST cannot be deferred to the date of actual payment of the annuity.
5. Court’s Reasoning
The Court noted that the question of when the liability to pay GST would arise on such annuity payments has been settled by a recent clarification. The Court relied entirely on Circular No. 221/15/2024-GST dated 26.06.2024, issued by the Government of India, Ministry of Finance, Central Board of Indirect Taxes and Customs (CBIC). The circular explicitly clarified that:
* The tax liability on the concessionaire under a HAM contract, including on the construction portion, would arise at the time of issuance of invoice, or receipt of payments, whichever is earlier, if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract.
* If invoices are not issued on or before the specified date or completion of the event, tax liability would arise on the date of provision of the service (i.e., the due date of payment as per the contract), or the date of receipt of the payment, whichever is earlier.
Given this clear clarification by the CBIC, the Court found that the assessing authority's and appellate authority's view was contrary to the circular.
6. Statutory References
- Section 13 of the Goods and Services Tax Act, 2017
- Section 13(2) of the Goods and Services Tax Act, 2017
7. Precedents Cited
No judicial precedents were cited. The Court based its decision on Circular No. 221/15/2024-GST dated 26.06.2024, issued by the Central Board of Indirect Taxes and Customs.