The Authority for Advance Rulings (AAR), Madhya Pradesh has ruled that no Goods and Services Tax (GST) is payable on collection of toll charges by sub- contractors.
The applicant was engaged in wholesale business, bonded warehouse and leasing business. The applicant wished to enter in a contract with an entity, HIPL which was allotted toll collection work of certain road by NHAI. As per the agreement, the entity would sub-let the toll collection work to the applicant.
The applicant submitted that the “service, by the way, to access to a road or by a bridge on payment of toll charges” was exempted service as per notification No. 12/2017-Central Tax (Rate) dated the 28th June 2017 (Sr. No. 23)(Heading No. 9967). Thus, the applicant sought advance ruling for a clarification that whether the same exemption would apply to services provided by the applicant on behalf of HIPL.
The authority noted that in case of providing access to a road or bridge on payment of toll charge, the exemption is totally based on service of providing access to a road or a bridge on payment of toll charges. There is no restriction regarding the supplier or the recipient of the supply. In the instant case, therefore, even though the supply of the service to the user of the toll road is by the sub-contractor, GST is not payable on the number of toll charges collected. It is exempted by Sr. No. 23 of Notification No. 12/2017-Central Tax (Rate) dated the 28th June 2017 and corresponding notification under MPGST Act, 2017.
Relying on the above notification, the AAR ruled that the toll charges collected by the applicant are not “toll charges” per se in the hands of the applicant, but held in the fiduciary capacity by the applicant, for onward remittance to HIPL.
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