GST on BOT Toll Highway Projects Upheld: Rajasthan High Court

The Rajasthan High Court has upheld a GST demand of over Rs. 16.36 crore holding that in Build-Operate-Transfer (BOT) toll highway projects, the right granted to a concessionaire to collect toll constitutes “consideration” and forms part of a taxable supply under the GST regime. The bench of Justice Arun Monga and Justice Sandeep Shah rejected the contention that toll collection itself is exempt and ruled that the transaction amounted to a taxable works contract service rendered to the National Highways Authority of India (NHAI). The writ petition challenging the GST department’s orders that imposed GST liability of Rs. 16.36 crore along with interest and penalty. The case arose from a concession agreement entered into between CG Tollway Ltd. and NHAI for six-laning of the Kishangarh–Udaipur–Ahmedabad section of National Highway-79 under the National Highways Development Programme (NHDP) on BOT (Toll) basis. Under the agreement, CG Tollway was required to design, build, finance, operate and transfer the highway project while receiving the right to collect toll during the concession period. The concessionaire had subcontracted the actual construction work to IRB Infrastructure Developers Ltd., while retaining the rights relating to operation and toll collection. The dispute began after an internal audit report alleged that the company had failed to discharge GST liability amounting to ₹16.36 crore. The GST department subsequently issued a show cause notice and eventually passed an assessment order raising the tax demand with penalty and interest, which was later upheld by the appellate authority. Before the High Court, the petitioner argued that no service had been provided to NHAI and therefore no taxable supply existed. The company maintained that the only consideration received was the right to collect toll, which was exempt under Entry 23 of Notification No. 12/2017-Central Tax (Rate). It also relied upon CBIC Circular No. 150/06/2021-GST and argued that GST could not be imposed because no annuity payment had been received from NHAI. The petitioner further contended that taxation would amount to impermissible double taxation because the construction activity had already suffered GST in the hands of the subcontractor, IRB Infrastructure Developers Ltd. It also pointed out that in similar cases in Gujarat and Karnataka, GST authorities had reportedly dropped audit proceedings. The State opposed the petition and argued that the arrangement clearly fell within the statutory definition of “supply” under Section 7 of the CGST Act. According to the State, the transaction represented a barter arrangement where the concessionaire constructed and maintained the road and, in return, received valuable rights including the right to collect toll. The department asserted that consideration under GST is not restricted to monetary payments and includes non-monetary consideration as well. The Court agreed with the State’s submissions and undertook an extensive analysis of Sections 2(31), 2(119) and Section 7 of the CGST Act dealing with consideration, works contracts and supply. The Bench observed that consideration under GST expressly includes payment “whether in money or otherwise,” and therefore non-monetary rights granted under a concession agreement can qualify as consideration. Examining the concession agreement, the Court noted that the agreement conferred several valuable rights upon the concessionaire, including leave and licence over project land, exclusive rights to operate and maintain the project, and authority to collect toll from users. The agreement also required payment of concession fees and premium to NHAI. The Bench observed that there were two independent contractual arrangements in the case — one between NHAI and CG Tollway Ltd., and another between CG Tollway Ltd. and its subcontractor IRB Infrastructure Developers Ltd. Since there was no privity of contract between NHAI and the subcontractor, the contractor-subcontractor taxation principle could not assist the petitioner. The Court held that the arrangement had all characteristics of a barter transaction. It said that in exchange for constructing and maintaining the road, the concessionaire had received significant commercial rights, including the right to collect toll and use project infrastructure during the concession period. The Court observed that the transaction squarely fell within the definition of works contract services and consequently constituted taxable supply under GST. The Bench held that toll collection rights represented consideration for construction services and therefore could not escape taxation merely because consideration was received in a non-monetary form. Case Details Case Title: CG Tollway Ltd. Versus The Union Of India Citation: JURISHOUR-1393-HC-2026(RAJ) Case No.: D.B. Civil Writ Petition No. 15048/2025 Date: 22.05.2026 Counsel For Petitioner: Bharat Raichandani Counsel For Respondent: Mahaveer Bishnoi, AAG Click Here To Read Order Read More: Abhijeet Dipke Moves Delhi High Court Against Suspension of ‘Cockroach Janata Party’ X Account

GST on BOT Toll Highway Projects Upheld: Rajasthan High Court

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