Clarification on Time of Supply in National Highway Projects under HAM Model

The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 221/15/2024-GST, dated June 26, 2024, to provide clarity on the time of supply for services related to the construction and maintenance of National Highway Projects by the National Highways Authority of India (NHAI) under the Hybrid Annuity Mode (HAM) model. This clarification addresses queries from the trade and field formations regarding the tax liability timing for these services.

Key Points of the Circular

1. Understanding the Hybrid Annuity Model (HAM):
   • In the HAM model, the concessionaire is responsible for the construction of new roads and the operation and maintenance (O&M) of these roads over a period, typically 15-17 years.
   • Payment for these services is divided into an upfront portion during the construction phase and deferred payments (annuities) spread over the maintenance period.
2. Clarification on Time of Supply:
   • The HAM contract is a single agreement covering both construction and O&M services. It cannot be split artificially based on payment terms.
   • Payments are staggered over the contract period, with installments due at specified periods or upon completion of certain milestones.
   • This arrangement qualifies as a ‘Continuous supply of services’ under Section 2(33) of the CGST Act.
3. Determination of Time of Supply:
   • As per Section 13(2) of the CGST Act, the time of supply for services is the earlier of the date of issue of the invoice or the date of receipt of payment, provided the invoice is issued within the period prescribed under Section 31.
   • For a continuous supply of services, if the invoice is not issued on or before the due date of payment or completion of an event, the time of supply is the date of provision of service or the date of receipt of payment, whichever is earlier.
4. Tax Liability:
   • The tax liability on the concessionaire under the HAM contract arises at the time of issuance of the invoice or receipt of payment, whichever is earlier if the invoice is issued on or before the due date.
   • If the invoice is not issued on or before the due date, the tax liability arises on the date of provision of service (due date of payment) or the date of receipt of payment, whichever is earlier.
   • The installments payable by NHAI to the concessionaire, including any interest component, are includible in the taxable value for tax purposes under Section 15(2)(d) of the CGST Act.

The CBIC’s clarification ensures uniformity in the implementation of GST provisions related to the HAM model contracts. It emphasizes the importance of timely issuance of invoices to determine the correct time of supply and tax liability. This guidance is crucial for concessionaires engaged in National Highway Projects to comply with GST regulations effectively.

For further details, please refer to Circular No. 221/15/2024-GST or contact your local GST office.