Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)

Last updated: 15 July 2021

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This circular clarifies the Goods and Services Tax (GST) applicability on road construction projects where payments are received in deferred instalments, known as annuities. While access to roads and bridges via annuity payments is exempt under GST, the construction service itself, which falls under a different category, is not covered by this exemption. Therefore, GST is applicable on annuity payments received for the construction of roads.

Circular No. 150/06/2021-GST CBIC-190354/36/2021-TRU Section-CBEC Government of India Ministry of Finance Department of Revenue North Block, New Delhi, Dated the 17thJune, 2021 To, The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All) Madam/Sir, Sub - Clarification regarding applicability of GST on the activity ofconstruction of road where considerations

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FAQ :

Yes, GST is applicable on annuity payments received for the construction of roads. The exemption for annuity payments applies only to the service of accessing a road or bridge, not to the construction service itself.

Heading 9967 covers supporting services in transport, specifically the operation services of roads, bridges, and tunnels. GST is exempt for services under this heading by way of access to a road or bridge on payment of annuity (entry 23A) or toll (entry 23).

Heading 9954 covers general construction services, including the construction of highways, streets, roads, bridges, and tunnels.

No, the exemption under entry 23A of notification No. 12/2017-Central Tax does not apply to services falling under heading 9954, which includes the construction of roads, even if payments are made in deferred instalments or annuities.

This clarification was issued by the Central Board of Indirect Taxes and Customs (CBIC) under Circular No. 150/06/2021-GST.

Notification No : Circular No. 150/06/2021-GST
Source : https://www.cbic.gov.in/resources//htdocs-cbec/gst/Circular_Refund_150.pdf

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