Order Date: 11 July 2022

Facts-

• The Petitioners, M/s DPJ Bidar and other are concessionaires who have been entrusted with construction of road by Karnataka Road Development Corporation Limited.
• As a consideration for construction  and maintenance of the roads for the contract period, the petitioners are paid certain amounts termed as ‘annuity’. In certain contracts where construction and maintenance of the roads has been outsourced to private persons consideration is paid by permitting the concessionaires/contractors to collect tolls from the vehicles plying on the road.
• The case of the petitioners is that service by way of access to a road or a bridge on payment of annuity is exempted.
• Thereafter, a clarification was sought from the GST Council by certain government authorities as to whether the entire annuity paid to the concessionaries was exempt from GST or not, for which the GST Council in its minutes of the 43r d GST Council meeting held on 28.05.2021 clarified the entry 23A of notification No.12/2017-CT(R) exempts services by way of providing access to road or bridge on payment of annuity. It does not exempt annuity paid for construction of roads.
• Thereafter, Circular dated 17.06.2021 was issued wherein clarification the above clarification provided by GST council was uphold.

Issue-

• Whether the impugned Circular is in violation of Notification nos.32 and 33/2017?

Order-

• The Hon’ble High Court observed that the notifications issued pursuant thereto clearly exempts the entire annuity being paid to the petitioners towards construction and maintenance of roads. It cannot be construed to have not exempted the annuity (deferred payments) towards construction of roads.
• In the instant case, notifications under Section 11 exempts the consideration received by concessionaires from highway authorities as annuity from GST. The clarification issued is contrary to the said notifications.
• For the aforementioned reasons, the impugned Circular is hereby set aside.