2018 (9) TMI 1039 – AUTHORITY FOR ADVANCE RULING, MADHYA PRADESH – 2018 (17) G. S. T. L. 499 (A. A. R. – GST) – Levy of GST – sub-let of Toll Collection work of certain road by NHAI – N/N. 12/2017-Central Tax(Rate) dated the 28th June, 2017 (Sr. No.23)(Heading No. 9967).
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Whether the same exemption will apply to services provided by the Applicant, i.e. Service by the way of access to a road or a bridge on payment of access to a road or a bridge on payment of toll charges on subcontract basis?
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Held that:- Under the scheme of exemption under Goods & Services Tax Laws, some exemptions are based on activities, some exemptions are based on recipient of the service, some are based on provider of the service and some are based on a combination of the service (goods being supplied as well as the recipient / provider of service.
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In case where the exemption is based on the recipient of service, the exemption is at times not available to the sub-contractor since the principal co
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tially two supplies being made; one to the user of the Toll Road, for which charges are paid by the user of the Road and the other by the applicant to Highway Infrastructure (P) Limited – the ruling has no bearing on the consideration received by the applicant from of Highway Infrastructure (P) Limited for the supplies made by the applicant to Highway Infrastructure (P) Limited.
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Ruling:- The Toll Charges collected by the applicant are not “Toll Charges” per se in the hands of the applicant, but held in fiduciary capacity by the applicant, for onward remittance to Highway Infrastructure (P) Limited. The Ruling does not in any way relate to the Toll Charges retained by the sub-contractor, in terms of its agreement with Highway Infrastructure (P) Limited. – AAR No. 11/2018/A.A.R/R-28/36 – Order No. 09/2018 – Dated:- 9-8-2018 – SHRI RAJIV AGRAWAL AND SHRI MANOJ KUMAR CHOUBEY, MEMBER Present on behalf of applicant: Shree Ankit Tandon, Director and CA Abhishek Jain PROCEEDINGS (Under s
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Applicant) is engaged in wholesale business, bonded warehouse and leasing business and registered with GSTN with GSTIN 23AAPCA7784F1ZC. 3.2. The Applicant wishes to enter in a contract with an entity. The entity has been allotted Toll Collection work of certain road by NHAI. The said entity wishes to sublet the Toll Collection work to the Applicant. 3.3. The Applicant cites Sr. No. 23 of Notification No. 12/2017-Central Tax (Rate) dated the 28th June, 2017 which reads as Service by the way to access to a road or by a bridge on payment of toll charges under heading 9967. 4. QUESTION RAISED BEFORE THE AUTHORITY – An entity has been allotted Toll Collection work of certain road by NHAI. The said entity wishes to sublet the Toll Collection work to the company. Now, as the Service by the way to access to a road or by a bridge on payment of toll charges is exempted service as per Notification No. 12/2017-Central Tax(Rate) dated the 28th June, 2017 (Sr. No.23)(Heading No. 9967). Whether the s
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(NHAI) is empowered to collect user fees (commonly known as toll charges ) from users of highways/roads on behalf of the Central Government for services or benefits rendered under the said Act. 6.2. It is however not uncommon for the NHAI to outsource the said activity of toll charges collection to third parties, commonly known as toll collection agencies . In terms of the National Highways Fee (Determination of Rates and Collection) Rules, 2008 (hereinafter referred to as NHFR ), the NHAI is empowered to enter into agreements with any person for the activity of collection of toll charges. 6.3. Normally, in terms of the aforesaid agreement, the NHAI appoints a person (known as contractor ) for collecting the prescribed toll charges from the users of the road/highways at one or more toll collection plazas. Thus, NHAI transfers the right to collect the toll charges from users through the contractor at the toll collection plazas. 6.4. Further, the contractor is generally required to remi
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the toll fee and, therefore, the contractor is not rendering any services to NHAI. In other words, a view could be taken that the contractor is carrying out the activity of toll collection on its own account only and not on behalf of NHAI. 6.9. It is however, pertinent to note that NHAI could have very well entered into the aforesaid arrangement only to ensure that NHAI receives an assured sum from the toll collection activity without any need to supervise the agent with respect to performance of duties, leakage of revenue etc. Thus, the contractor, in its own interest would ensure that the toll charges are being properly collected and remitted to NHAI. For the contractor, higher the amount of toll charges collected higher is its own revenue. 6.10. In the present case, the Applicant M/S Ankit Tandon Enterprises is a company registered on 07/07/2017 with the main object of providing services of construction of roads, bridges etc and collection of Toll on direct or subcontract basis. 6.1
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specified highways and will collect toll charges from the users by using its own infrastructure and man power. 4. Irrespective of amount collected from toll, the Applicant company will pay a fixed sum to the Entity i.e. the main contractor and any excess or deficit at the end of the period would tantamount to its profit or loss. 5. It is pertinent to note that the agreement between NHAI and the Entity, the Entity was to collect toll charges and now due to the sub contract of the said work by the proposed agreement, the Applicant company would collect toll charges on behalf of the Entity. So nature of receipt for all parties i.e. NHAI, the Entity and the Applicant Company is Toll Charges only, i.e. all the parties are engaged into toll collection service through different channels and as the Toll collection service is exempted from GST vide clause 23 of Notification No. 12/2017 dated 28/06/2017, the Applicant company claims that the service provided by it are in the nature of Toll Coll
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herefore entitled for exemption vide clause 23 of Notification No. 12/2017 dated 28/06/2017. 6.12 The proposed terms and condition for user fee collection contract between Highway Infrastructure Private Limited(First Party) and the applicant, M/S Ankit Tandon Enterprises and Tollways Private Limited(Second Party) arc as follows- Basic Terms & Conditions of the Contract 1. Both party with their mutual understanding applied in a 4 years Toll Collection Contract of NHAI advertisement no. Bid/Package on NHAI/13013/CO/RFP/Long Term/Nagpur-Betul/2017 Dated 11-01-2018. APC ₹ 39,70,00,000/- (Thirty Nine Crore Seventy Lac Only). 2. For the above said work we bid for ₹ 46,07,00,000/- (Forty Six Crore Seven Lac Only). 3. Second Party will make the payment of monthly remittance basis and this payment will change every year due to rate revision done by NHAI. 4. Security deposit for 1.5 months remittance basis and bank Guarantee of 3 months Remittance will be make by first Party and
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exemptions are based on activities, some exemptions are based on recipient of the service, some are based on provider of the service and some are based on a combination of the service (goods being supplied as well as the recipient / provider of service. For example, certain construction services, when provided to the Government are granted exemption. In certain cases, where whole of the supplies being made are under RCM, the service provider is not liable to obtain registration. 7.4 In case where the exemption is based on the recipient of service, the exemption is at times not available to the sub-contractor since the principal contractor receiving supplies from the sub-contractor may not fulfil the qualification regarding recipient as per the exemption notification. In some cases, specific provision has been given in the Notifications itself to take into its fold, the supply by a sub-contractor. For example in Clause (ix) and (x) of Sl.No.3 in Notification No. 11/2017 – Central Tax (R
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charge, the exemption is totally based on service of providing access to a road or a bridge on payment of toll charges. There is no restriction regarding the supplier or the recipient of the supply. In the instant case, therefore, even though the supply of the service to the user of the Toll Road is by the sub-contractor, GST is not payable on the amount of Toll Charges collected. It is exempted by Sr. No. 23 of Notification No. 12/2017-Central Tax(Rate) dated the 28th June, 2017 and corresponding notification under MPGST Act,2017. Which reads as: Chapter, Section or Heading Description of service SGST CGST Heading 9967 services providing access to a Road or Bridge on payment of toll charge NIL NIL 8.2 The above ruling in the application is limited to the question stated in Sl. No. 14 of the Application, which relates to the liability of Goods & Services Tax on the Toll Charges collected. It has no bearing on the consideration received by the applicant from of Highway Infrastructu
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