Case Law Details
CG Tollway Limited Vs Union of India & Ors. (Supreme Court of India)
Supreme Court issues notice and stays Rajasthan High Court order upholding GST on toll-road concessionaire under DBFOT/BOT (Toll) model
The proceedings arose from a challenge to GST liability imposed on a concessionaire operating a national highway project under a Design, Build, Finance, Operate and Transfer (DBFOT) / BOT (Toll) concession agreement with the National Highways Authority of India (NHAI). The Deputy Commissioner, exercising powers under Section 73 of the Rajasthan Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017, held the concessionaire liable to pay GST of ₹16,36,20,418 along with interest and penalty. The Appellate Authority upheld the order, following which the concessionaire approached the Rajasthan High Court.
Before the High Court, the petitioner contended that no service was provided to NHAI and therefore there was no supply attracting GST. It relied on Entry 23 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, Circular No. 150/06/2021-GST dated 17.06.2021, and submissions that the only consideration received was the right to collect toll, which it claimed was exempt. The petitioner also argued that construction work had been executed through a subcontractor that had already discharged GST, that similar proceedings had been dropped in Gujarat and Karnataka, and that taxing the petitioner again would amount to double taxation. Reliance was also placed on decisions including Larsen & Toubro Ltd. v. State of Andhra Pradesh, State of Andhra Pradesh v. Larsen & Toubro Ltd., and GMR Pochanpalli Expressways Limited v. Additional Director, DGGI and Ors.
The State raised a preliminary objection regarding the availability of an appellate remedy under Section 112 of the CGST Act but acknowledged that the Tribunal was not functional. On merits, it contended that the concession agreement constituted a taxable supply under Section 7 of the CGST Act, that the right to collect toll was consideration received in a barter arrangement for construction services, and that construction services fell under Heading 9954 rather than the exempt Heading 9967. It further relied upon the clarification issued through Circular No. 150/06/2021-GST dated 17.06.2021.
The High Court first held that, as the Tribunal was not functional, the writ petition could be entertained despite the statutory appellate remedy. It then examined the statutory definitions of “consideration”, “works contract” and “supply” under the CGST Act and the relevant valuation provisions, together with the concession agreement. The Court noted that the agreement granted the concessionaire rights to design, build, finance, operate and maintain the highway, granted leave and licence over the project land, authorised collection of toll from users, and required payment of concession fee and premium to NHAI. It also noted that there were two separate contracts—one between NHAI and the concessionaire, and another between the concessionaire and the EPC contractor—with no privity of contract between NHAI and the subcontractor.
On that basis, the High Court held that the arrangement constituted a supply under Section 7 of the CGST Act. It found that the concessionaire supplied works contract services to NHAI and, in return, received rights including leave and licence over the project site and the right to collect toll, which together amounted to consideration in the nature of barter. The Court rejected the contention that the subcontractor’s payment of GST precluded liability on the concessionaire, holding that the two contracts were distinct and did not overlap.
The High Court further considered Notification No. 12/2017-Central Tax (Rate) and Circular No. 150/06/2021-GST. It concluded that the exemption under Heading 9967 applied to services by way of access to a road or bridge on payment of toll, whereas construction services fell under Heading 9954. Referring to the Circular, it held that construction of roads remained taxable even where consideration was received through deferred payments or annuity, and that, in the present arrangement, toll collection formed part of the consideration for construction services. The Court also referred to principles governing interpretation of exemption notifications, including Commr. of Customs v. Dilip Kumar & Co. and Commr. (CGST) v. Safari Retreats (P) Ltd.; (2025) 2 SCC 523, and agreed with the reasoning of the Telangana High Court in GMR Pochanpalli Expressways Limited v. Additional Director, DGGI and Ors.; 2024 SCC OnLine TS 3988. It rejected the petitioner’s reliance on audit proceedings in Karnataka and Gujarat, holding that those matters involved different issues and that negative equality could not be invoked. Accordingly, the High Court upheld the orders of the Deputy Commissioner and the Appellate Authority and dismissed the writ petition.
The matter was then carried to the Supreme Court. The Supreme Court issued notice to the respondents, made the notice returnable on 03.08.2026, directed service on the interim prayers, permitted service upon the Central Agency in relation to respondent No. 1, and stayed the Rajasthan High Court order. The Supreme Court’s order, as provided, records these procedural directions and the grant of interim stay, without expressing any final view on the merits of the controversy or deciding the issues considered by the High Court.
Argued by Adv. Bharat Raichandani i/b UBR Legal.
Also Read HC Judgment in this case: Rajasthan HC Upholds GST on BOT Highway Project as Toll Rights Constitute Consideration for Construction Services
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Issue notice to the respondents, returnable on 03.08.2026.
2. Service of notice on interim prayer(s) also.
3. Petitioner’s counsel is also permitted to serve the Central Agency vis-a-vis respondent No.1.
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