Facts of the case:
The petitioner challenged the order under Section 73 of the Rajasthan Goods and Services Tax Act, 2017 and the CGST Act, whereby GST demand along with interest and penalty was confirmed against the petitioner. Under the concession agreement, the petitioner was required to construct, operate and maintain the highway and, in return, was granted the right to collect toll from users during the concession period. The agreement also required the petitioner to pay concession fee and premium amounts to NHAI.
The petitioner subcontracted the actual construction work to M/s IRB Infrastructure Developers Ltd., which discharged GST on the works contract services rendered to the petitioner. During audit proceedings, the department alleged that the petitioner itself had rendered taxable works contract services to NHAI and had failed to discharge GST liability on the consideration received in the form of toll collection rights and other contractual benefits.
The petitioner contended that no service was supplied to NHAI and that the only consideration received was toll collection, which was exempt under Entry 23 of Notification No. 12/2017-CT (Rate). The petitioner also argued that GST had already been paid by the subcontractor and therefore levy on the petitioner would amount to impermissible double taxation. Reliance was placed upon the decisions in State of Andhra Pradesh v. Larsen & Toubro Ltd. and CBIC Circular dated 17.06.2021. It was further argued that similar proceedings in Gujarat and Karnataka had been dropped.
Issue:
Whether a concessionaire undertaking construction, operation and maintenance of highways under a BOT (Toll) arrangement, in exchange for toll collection rights and related concessions, is liable to GST on works contract services rendered to NHAI. Also, whether toll collection rights constituted “consideration” under Section 2(31) of the CGST Act, whether the arrangement amounted to a taxable “supply” under Section 7, whether exemption under Entry 23 of Notification No. 12/2017-CT (Rate) applied to the transaction, and whether levy of GST on the concessionaire amounted to impermissible double taxation where the subcontractor had already paid GST.
Held That:
The Court held that the concession agreement clearly involved a taxable supply of works contract service by the petitioner to NHAI. It observed that Section 7 of the CGST Act gives a wide meaning to “supply” and specifically includes barter, licence and exchange. In the present case, the petitioner undertook construction and maintenance obligations and, in return, received valuable commercial rights including the right to collect toll, licence over project land and operational rights over the highway.
Such reciprocal obligations constituted barter and therefore fell squarely within the definition of taxable supply. The Court further held that toll collection rights constituted “consideration” under Section 2(31), since consideration may be in money or otherwise.
Rejecting the exemption claim, the Court clarified that Entry 23 of Notification No. 12/2017-CT (Rate) exempts only the service of access to roads or bridges on payment of toll under Heading 9967, whereas the petitioner was providing construction services classifiable under Heading 9954.
Reliance was placed upon CBIC Circular dated 17.06.2021, which clarified that exemption available for toll or annuity does not extend to construction services where consideration is received in deferred form. The Court also rejected the plea of double taxation by holding that there were two independent contracts ie. one between NHAI and the petitioner and another between the petitioner and the subcontractor. The subcontractor supplied services to the petitioner, whereas the petitioner independently supplied works contract services to NHAI, making both transactions separately taxable.
The Court distinguished the decision in Larsen & Toubro on the ground that it was rendered in the context of VAT on transfer of property in goods and not GST on supply of services. Reliance was also placed on the Telangana High Court ruling in GMR Pochanpalli Expressways Ltd. v. Additional Director DGGI, which had upheld the validity of the CBIC Circular and recognized taxability of BOT road construction arrangements.
The Rajasthan High Court dismissed the writ petition and upheld the GST demand raised against the petitioner.
Case Name: CG Tollway Ltd. v. Union of India dated 22.05.2026
