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Circular No.-221/15/2024-GST
F.No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
North Block, New Delhi
Dated the 26th June, 2024
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on time of supply in respect of supply of services of construction of
road and maintenance thereof of National Highway Projects of National Highways
Authority of India (NHAI)in Hybrid Annuity Mode (HAM) model -reg.
Representations have been received from the trade and the field formations seeking
clarification regarding the time of supply in respect of supply of services of construction of
road and maintenance thereof of National Highway Projects in Hybrid Annuity Mode (HAM)
model, where certain portion of Bid Project Cost is received during construction period and
remaining payment is received through deferred payment (annuity) spread over years.
2.
In order to clarify the issue and to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred by
section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as
“CGST Act”), hereby clarifies the issues as under:
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S.No. Issue
Clarification
1.
Under HAM model of National
Highways Authority of India
(NHAI), the concessionaire has
to construct the new road and
provide
Operation
&
Maintenance of the same which
is generally over a period of 15-
17 years and the payment of the
same is spread over the years.
What is the time of supply for the
purpose of payment of tax on the
said service under the HAM
model?
Under the Hybrid Annuity Model (HAM) of
concession agreements, the highway development
projects are under Design, Build, Operate and
Transfer
model
(DBOT),
wherein
the
concessionaire is required to undertake new
construction of Highway, as well as the Operation
and Maintenance (O&M) of Highways. The
payment terms for the construction portion as well
as the O&M portion of the contract are provided in
the
agreement
between
National
Highways
Authority of India (NHAI) and the concessionaire.
2.1 A HAM contract is a single contract for
construction as well as operation and maintenance
of the highway. The payment terms are so
staggered
that
the
concessionaire
is
held
accountable for the repair and maintenance of the
highway as well. The contract needs to be looked
at holistically based on the services to be
performed by the concessionaire and cannot be
artificially split into two separate contracts for
construction and operation and maintenance, based
on the payment terms. The concessionaire is
bound contractually to complete not only the
construction of the highway but also to operate and
maintain the same.
2.2
In HAM contract, the payment is made
spread over the contract period in installments and
payment for each installment is to be made after
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specified periods, or on completion of an event, as
specified in the contract. The same appears to be
covered under the ‘Continuous supply of services’
as defined under section 2(33) of the CGST Act.
2.3
As per clause (a) of Section 13(2) of CGST
Act, the time of supply in respect of a supply of
services shall be the date of issue of Invoice, or
date of receipt of payment, whichever is earlier,
in cases where invoice is issued within the period
prescribed under section 31 of CGST Act. Further,
as per clause (b) of Section 13(2) of CGST Act, in
cases where invoice is not issued within the period
prescribed under section 31, the time of supply of
service shall be date of provision of the service or
date of receipt of payment, whichever is earlier.
However, as per section 31(5) of CGST Act, in
cases of continuous supply of services, where the
payment is made periodically, either due on a
specified date or is linked to the completion of an
event, the invoice is required to be issued on or
before the specified date or the date of completion
of that event.
2.4 Accordingly, as per section 13(2) of CGST Act,
read with section 31(5) of CGST Act, time of supply
of
services
under
HAM
contract,
including
construction and O&M portion, should be the date of
issuance of such invoice, or date of receipt of
payment, whichever is earlier, if the invoice is issued
on or before the specified date or the date of
completion of the event specified in the contract, as
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applicable. However, in cases, where the invoice is
not issued on or before the specified date or the date
of completion of the event specified in the contract,
as per clause (b) of section 13(2), time of supply
should be the date of provision of the service, or date
of receipt of payment, whichever is earlier. In case of
continuous supply of services, the date of provision
of service may be deemed as the due date of payment
as per the contract, as the invoice is required to be
issued on or before the due date of payment as per
the provisions of Section 31(5) of CGST Act.
3. In the light of above, it is clarified that the tax
liability on the concessionaire under the HAM
contract, including on the construction portion,
would arise at the time of issuance of invoice, or
receipt of payments, whichever is earlier, if the
invoice is issued on or before the specified date or
the date of completion of the event specified in the
contract, as applicable. If invoices are not issued on
or before the specified date or the date of completion
of the event specified in the contract, tax liability
would arise on the date of provision of the said
service (i.e., the due date of payment as per the
contract), or the date of receipt of the payment,
whichever is earlier.
4. It is also clarified that as the installments/annuity
payable by NHAI to the concessionaire also includes
some interest component, the amount of such interest
shall also be includible in the taxable value for the
purpose
of
payment
of
tax
on
the
said
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3.
It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.
4.
Difficulty, if any, in implementation of this Circular may please be brought to the
notice of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
annuity/installment in view of the provisions of
section 15(2)(d) of the CGST Act.
