The main legal point established is that the annuity paid to concessionaires for construction and maintenance of roads is exempt from GST as per notifications 32/2017 and 33/2017.

ORDER

1. Petitioners in both the writ petitions are concessionaires who have been entrusted with construction of road by respondent no.7-Karnataka Road Development Corporation Limited. As a consideration for construction and maintenance of the roads for the contract period, the petitioners are paid certain amounts termed as 'annuity' by respondent no.7. In certain contracts where construction and maintenance of the roads has been out sourced to private persons consideration is paid by permitting the concessionaires/contractors to collect tolls from the vehicles plying on the road.

2. 100% exemption under Goods and Services Tax (for short 'GST') was granted towards collection of toll charges by way of notification No.12/2017 dated 28.06.2017 issued by respondent no.1. The toll charges as already stated above consisted of the entire consideration towards construction, operation and maintenance of the road. In other words, it consisted of the charges collected towards construction as well as services provided by the concessionaires. Subsequently, it was proposed that annuity, which was being paid by the highway authorities as a consideration to the concessionaires instead of permitting them to collect toll charges be also exempted from GST. In this regard, the minutes of 22nd GST Council meeting held on 06.10.2017 reads as under:

'Agenda item 13(iv): Issue of Annuity being given in Place of Toll Charges to Developers of Public Infrastructure - exemption thereon

61. Introducing this Agenda item, the Joint Secretary (TRU-II), CBEC stated that while toll is a payment made by the users of road to concessionaires for usage of roads, annuity is an amount paid by the National Highways Authority of India (NHAI) to concessionaires for construction of roads in order that the concessionaire did not charge toll for access to a road or a bridge. In other words, annuity is a consideration for the service provided by concessionaires to NHAI. He stated that construction of roads was now subject to tax at the rate of 12% and due to this, there was free flow of input tax credit from EPC (Engineering, Procurement and Construction) contractor to the concessionaires and thereafter to NHAI. He stated that as a result, tax at the rate of 12% leviable on the service of road construction provided by concessionaire to NHAI would be paid partly from the input tax credit available with them. He stated that the Council may take a view for grant of exemption to annuity paid by NHAI/State Highways Construction Authority to concessionaires during construction of roads. He added that access to a road or bridge on payment of toll was already exempt from tax. The Hon'ble Minister from Haryana suggested to also cover under this provision annuity paid by State-owned Corporations. After discussion, the Council decided to treat annuity at par with toll and to exempt from tax, service by way of access to a road or bridge on payment of annuity.'

3. In this regard, two notifications viz., notification no.32/2017 and notification no.33/2017 were issued on 13.10.2017 and the service by way of access to a road or a bridge on payment of annuity was also exempted. The relevant portions of the notifications read as under:

'Notification No.32/2017

(d) after serial number 23 and the entries relating thereto, the following serial number and entries shall be inserted namely:-

Notification No.33/2017

(d) after serial number 24 and the entries relating thereto, the following serial number and entries shall be inserted namely:-

4. Pursuant to the said notifications, the annuity being paid by the highway authorities to