NHAI details four scenarios where considerations are received as annuity
To implement GST in road constructions where payment by the government is made in parts, i.e., annuity, the National Highway Authority of India (NHAI) has come out with circular defining various scenarios.
The GST Council, in its meeting on May 28, recommended no exemption from GST on the annuity (deferred payments) paid for the construction of the road. The rate of GST here is 12 percent.
Based on the GST Council’s recommendation followed by a circular by the Central Board of Indirect Taxes and Customs (CBIC), NHAI has issued detailed clarification on four different scenarios. The first is with regard to projects where the bid due date was on or before June 30, 2017 (as GST was implemented from July 1). Here, GST on annuity payments will be paid or reimbursed as per standard operating procedures. Tax calculation will be made on the total cost of the project i.e. bid project case plus escalation tax. The impact of additional GST will be calculated after adjusting input tax credit (ITC) lying with the concessionaire.
The second scenario talks about projects where bid due date was on or after July 1, 2017, and on or before October 13, 2017. Here, no GST on annuity under the change in law will be paid or reimbursed since bids were invited inclusive of GST.
The third scenario is related to projects where the bid due date was on or before October 14, 2017, and on or before June 16, 2021. Here, the effect of change in the law on annuity will be calculated at applicable GST rates after adjusting ITC. Also, no GST will be paid on part of the project cost known as construction support, and which is taken as 40 percent of total. Here, GST on interest on annuity payments will also be payable.
The fourth scenario relates to projects where the bid due date was after June 16, 2021. Here, no GST will be paid as bids are being invited exclusive of GST.
