M/S. Apco Arasavalli Expressway Private Limited vs. The Assistant Commissioner (St)

Held

The Court held that the liability to pay GST on annuity payments under a Hybrid Annuity Mode concession agreement arises at the time of issuance of the invoice or receipt of payment, whichever is earlier. This decision was based on a circular dated 26.06.2024 issued by the Government of India, Ministry of Finance, Central Board of Indirect Taxes and Customs (CBIC). The circular clarified that tax liability on concessionaires under HAM contracts, including the construction portion, would arise at the time of invoice issuance or receipt of payments, whichever is earlier, if invoices are issued on or before the specified date or completion of the event. If invoices are not issued timely, tax liability arises on the date of provision of service (due date of payment) or receipt of payment, whichever is earlier. Consequently, the impugned assessment and appellate orders were set aside, and the respondent authorities were directed to collect tax in accordance with the CBIC circular. Any amounts recovered were to be refunded to the petitioner.

Facts

M/s. Apco Arasavalli Expressway Private Limited (the petitioner) is engaged in road construction under a concession agreement dated 18.01.2018 with the National Highway Authority of India. The agreement involves designing, building, operating, and transferring a section of National Highway No.16 on a Hybrid Annuity Mode. The petitioner completed construction and paid GST on the construction consideration. A dispute arose regarding the GST liability on annuity payments received by the petitioner. The petitioner contended that GST is payable on annuity upon raising an invoice or receiving payment, whichever is earlier. However, the assessing authority held that GST is payable on all annuity installments at the inception of the concession period. The petitioner's appeals against assessment orders for different periods were dismissed by the Appellate Authority.

Key Issues

1. Whether the liability to pay GST on annuity payments under a Hybrid Annuity Mode concession agreement arises at the time of raising an invoice or receipt of payment, or at the inception of the concession period? Petitioner's argument: The petitioner argued that GST liability on annuity payments arises at the time of invoice issuance or payment receipt, whichever is earlier, as per standard GST provisions. They relied on the principle that taxability is linked to the actual supply or consideration receipt. Revenue's argument: The revenue (assessing and appellate authorities) contended that GST is payable on all annuity installments at the inception of the concession period. Their reasoning was that the annuity is for the maintenance and management of the road, responsibilities that commence from the beginning of the concession period, implying the service is effectively supplied from that point.