GST Council may discuss tax relief for road, highway developers
The Goods and Services Tax (GST) Council is preparing to deliberate on potential tax relief measures for road and highway developers, as per CNBC-TV18. The discussion, scheduled for June 22, may lead to a clarification regarding the hybrid annuity model. It is expected that the council will propose changes to invoice rules, and the applicability of GST on interest components included in installments or annuities payable by the National Highways Authority of India (NHAI) to the builder.
Understanding the hybrid annuity model
The hybrid annuity model is a public-private partnership, where the government typically pays 40% of the construction cost in annual payments. Developers are responsible for arranging the remaining funds, which they later recover from toll collections. The GST Council's upcoming discussion may clarify that under this model, the GST payable by the developer for parts of the project under construction or maintenance, will only become due when the invoice is raised or when payment is made, whichever comes first.
Proposed changes to invoice rules
The GST Council may also propose a new rule regarding invoices under the hybrid annuity model. Sources told CNBC-TV18 that, "If invoices are not issued on or before the specified date or the date of completion of the contract, tax liability will arise on the date of provision of the said service or the date of receipt of the payment, whichever is earlier." This change is expected to provide clarity for highway developers and ensure timely issuance of invoices.
GST applicability on interest components
The GST Council is expected to suggest that if any interest component is included in installments or annuity payable by the NHAI to the builder, GST will be applicable on that interest as well. Currently, such payments received are taxed at a rate of 12%. This proposal is aimed at standardizing the taxation process for highway developers under the hybrid annuity model.
