Road cos hope to escape GST net

Road developers are adopting a wait-and-watch strategy on goods & services tax (GST) rollout for construction projects as the government is yet to announce if the contracts will be exempt from the taxation or not.

A fortnight ago, the GST Council exempted toll revenue from GST.

As per the schedule of GST rates for services, “Service by way of access to a road or a bridge on payment of toll charges” has not been included under the taxation fold.

Until now, no service tax was levied on toll revenue and this exemption will continue in GST too. “There will not be any tax on toll revenues but we are waiting for rate slab or exemption announcement for government contracts, be it build-operate-transfer, hybrid annuity model or engineering, procurement and construction road projects,” said Virendra Mhaiskar, chairman and managing director of IRB Infrastructure Developers.

Bajrang Kumar Choudhary, managing director, Bharat Road Networks Ltd, told DNA Money, “There’s no service tax on tolling. If GST rate slab is announced, it will be passed on to the authority.”

Industry players hope that as no tax exists on the government contracts and road projects, the same is likely to remain unchanged. “There’s very less tax of around 0.5% or 0.6%, today, thus output tax is hardly there,” Mhaiskar said.

“What we need to see is which specific contracts will get exemption status and which government contracts won’t,” said another road developer.

With a few more weeks left for the rollout of the new tax regime, road developers are positive in getting the exemption status.

Meanwhile, a recent CARE Ratings report said, “With input tax credit available, the new tax rate would be effectively lower than the existing tax rates. EPC players would benefit with improvement in margins.”

Prior to GST, the value-added tax and duties are in the range of 9-11%, whereas post-GST rollout 12% rate has been fixed.