This CBIC notification, No. 10/2026-Union Territory Tax (Rate), issued on October 27, 2026, introduces a special procedure for the payment of Union Territory Goods and Services Tax (UTGST) under the Toll-Operate-Transfer (TOT) model.
Key Statutory Clarifications & Analysis
1. Applicability & Compliance Framework
Effective from November 1, 2026, it leverages powers under Section 21 of the UTGST Act, 2017, read with Section 148 of the CGST Act, 2017, to notify a specific class of registered persons: Concessionaires under a concession agreement who provide operation and maintenance (O&M) services to the concessioning authority.
Point 2
The core amendment dictates that such concessionaires will pay UTGST on their O&M services based on the amount charged or debited from an Escrow Account, specifically for O&M expenses incurred.
Point 3
This payment is to be made in the tax period when such expenditure is charged or debited.
Point 4
The notification defines 'Concession Agreement' as one under the TOT model where the concessionaire has exclusive rights to collect toll, operates and maintains the road/highway, and pays an upfront concession fee.
5. 'Concessioning authority'
Includes various government entities.
6. Applicability & Compliance Framework
This aims to streamline tax compliance for a complex infrastructure financing model by linking tax payment to actual expenditure drawdown from a dedicated account.
Procedural Changes & Compliance Impact
- Special procedure for UTGST payment on Operation & Maintenance (O&M) services by Concessionaires under the Toll-Operate-Transfer (TOT) model.: Concessionaires will now pay UTGST on O&M services based on amounts charged or debited from an Escrow Account for O&M expenses, rather than potentially on the entire concession fee or other revenue recognition methods. This provides clarity and aligns tax payment with actual O&M expenditure recognition.
- Taxable value for O&M services is the 'amount charged or debited from the Escrow Account... towards operation and maintenance expenses incurred'.: This clarifies the specific base for UTGST calculation for O&M services, reducing ambiguity and ensuring tax is levied on the actual O&M costs funded through the escrow mechanism, in the tax period when the debit occurs.
- Applicability is limited to 'Concessionaire under a concession agreement, who supplies operation and maintenance services to the concessioning authority during the concession period' under the TOT model.: The special procedure is highly specific, targeting only entities involved in TOT road/highway projects. Other types of concessionaires or service providers will continue to follow general GST provisions.
- Effective date is November 1, 2026.: Taxpayers falling under this definition must implement the new tax payment procedure for O&M services from this date, requiring adjustments to their accounting and GST compliance systems.