Rajasthan HC Upholds GST on BOT Highway Project as Toll Rights Constitute Consideration for Construction Services

CG Tollway Ltd Vs Union of India (Rajasthan High Court)

The Rajasthan High Court considered a challenge to orders passed by the GST authorities holding a concessionaire liable to pay GST of ₹16.36 crore along with interest and penalty in relation to a highway project executed under a Build, Operate and Transfer (BOT) toll model. The concession agreement entered into with NHAI required the concessionaire to design, build, finance, operate and transfer the highway, while also granting it the right to collect toll during the concession period. The construction work was executed through a subcontractor, while toll collection was undertaken by the concessionaire.

The petitioner contended that no service had been provided to NHAI and therefore there was no “supply” under the GST law. It further argued that the only benefit received was the right to collect toll, which was exempt under Entry 23 of Notification No. 12/2017-Central Tax (Rate). The petitioner also submitted that GST had already been paid by the EPC subcontractor on the construction activity and that any further levy would amount to impermissible double taxation. Reliance was also placed on proceedings in Gujarat and Karnataka where similar audit objections had allegedly been dropped.

The State opposed the petition, arguing that the concession agreement constituted a taxable transaction. It submitted that the right to collect toll represented consideration received by the concessionaire and that the arrangement was effectively a barter transaction, with road construction and maintenance being undertaken in return for toll collection rights and other contractual benefits. The State further contended that exemption under Heading 9967 applied only to services by way of access to roads or bridges on payment of toll and not to road construction services falling under Heading 9954.