GST reforms: No tax on toll collection by highway concessionaires; road maintenance tax liability clarified

In a move expected to settle tax ambiguity around highway monetisation and provide greater certainty to infrastructure projects, the GST Council on Thursday clarified that concessionaires collecting toll tax will have no tax exposure as the toll paid by users is exempt.

The exemption will apply to both types of contracts, whether the concessionaire pays upfront or over time, and the two types of contracts will be treated alike, it said.

"If the toll itself bears no tax, the right to collect the toll cannot bear tax either, because the concessionaire is paying for nothing other than the toll he expects to collect," the council said.


The council also said tax on road maintenance services will fall due when the concessionaire actually draws money against expenditure incurred, removing ambiguity over whether merely setting aside funds in an escrow account constitutes a tax liability. "The special procedure will be notified to give effect to this," it said.

Under a national highway contract, a certain proportion of money is set aside in an escrow account for road maintenance and released only as it is spent.

Kuljit Singh, partner and national infrastructure leader at EY India, said that in the absence of clarity on whether GST applied to toll collection, some risk-averse concessionaires were building the tax into their prices.