GST Liability on BOT Toll Highway Concession Agreements

Court : Rajasthan High Court

Brief :

The Rajasthan High Court examined whether a concessionaire engaged in construction, operation, and maintenance of highways under a Build-Operate-Transfer (BOT) Toll model is liable to pay GST on services rendered to the National Highways Authority of India (NHAI).

The petitioner challenged an order passed under Section 73 of the Rajasthan GST Act, 2017 and the CGST Act through which GST demand, interest, and penalty were imposed. Under the concession arrangement, the petitioner was entrusted with the responsibility of developing and maintaining the highway project and, in return, was granted commercial rights including toll collection during the concession period. The agreement also required payment of concession fees and premiums to NHAI.

For execution of the construction work, the petitioner had appointed M/s IRB Infrastructure Developers Ltd. as subcontractor, which had already discharged GST liability on works contract services. However, during audit proceedings, the department alleged that the petitioner itself had supplied taxable works contract services to NHAI in exchange for toll collection rights and associated benefits under the concession agreement.

The petitioner argued that toll collection was exempt under Entry 23 of Notification No. 12/2017-CT (Rate) and therefore no GST could be levied. It was further contended that GST had already been paid by the subcontractor and any additional levy would result in double taxation. Reliance was placed on State of Andhra Pradesh v. Larsen & Toubro Ltd. and the CBIC Circular dated 17.06.2021. The petitioner also pointed out that similar proceedings initiated in other States had been dropped.

Citation :

CG Tollway Ltd. v. Union of India, decided on 22.05.2026

Judgement :

The High Court dismissed the writ petition and upheld the GST demand raised against the petitioner. The Court observed that the concession agreement created reciprocal obligations amounting to a taxable “supply” under Section 7 of the CGST Act. In exchange for construction and maintenance of the highway, the petitioner received valuable commercial and operational rights, including the right to collect toll, which constituted valid “consideration” under Section 2(31) of the CGST Act.

The Court clarified that Entry 23 of Notification No. 12/2017-CT (Rate) grants exemption only to the service of access to roads or bridges on payment of toll and not to construction services rendered under works contract arrangements. It further relied on the CBIC Circular dated 17.06.2021, which specifically clarified that exemption available to toll or annuity does not extend to construction services where consideration is received in a deferred or non-monetary form.

Rejecting the plea of double taxation, the Court held that the contract between the petitioner and NHAI was independent from the subcontract agreement between the petitioner and IRB Infrastructure Developers Ltd. Since both involved separate taxable supplies, GST liability could arise independently in each transaction.

The Court also distinguished the ruling in Larsen & Toubro by observing that the said judgment was delivered in the context of VAT law and not GST on supply of services. Reliance was additionally placed on the Telangana High Court decision in GMR Pochanpalli Expressways Ltd. v. Additional Director DGGI, which had recognised GST applicability on BOT highway projects.