Road Construction for Toll Rights Is Taxable Barter: Rajasthan HC in CG Tollway v. Union of India

In CG Tollway Ltd v. The Union of India & Ors. (2026:RJ-JD:22539-DB), the Rajasthan High Court held that the concessionaire's works under a DBFOT concession are a taxable works contract supply to NHAI (paras 30–33). A Division Bench of Justice Arun Monga and Justice Sandeep Shah (author) dismissed the writ and affirmed GST of ₹16,36,20,418 with interest and 10% penalty (paras 5, 56). The Court entertained the writ only because the GST Appellate Tribunal was not functional (para 18).

Headnote: GST on BOT Toll Concession

CGST Act, 2017 / RGST Act, 2017 – Sections 2(31), 2(119), 7, 15, 73, 107, 112 – Schedule II Entry 6 – Notification No. 12/2017-CT (Rate), Entries 23 and 23A – Circular No. 150/06/2021-GST – BOT (Toll) concession – Barter – Works contract – Double taxation – GSTAT not functional

Held: (i) A writ cannot be refused for want of a Section 112 appeal when the Appellate Tribunal is not functional (para 18). (ii) Construction and maintenance of the highway in exchange for toll rights, site licence and right of way is a "barter" and hence a "supply"; the toll rights are "consideration" (paras 30–32). (iii) The arrangement is a works contract service under Section 2(119) read with Schedule II Entry 6 (paras 32–33). (iv) Entry 23 exempts access to a road on payment of toll under Heading 9967, not road construction under Heading 9954, as Circular No. 150/06/2021-GST clarifies (paras 39–42). (v) The sub-contract and the concession are distinct contracts, so there is no double taxation (paras 34–36, 43–45). (vi) Dropped audit objections in other States create no parity; there is no negative equality (paras 51–54).

(paras 18–56)

Case Details: CG Tollway v. Union of India (2026:RJ-JD:22539-DB)

Final Outcome: Writ petition dismissed; orders dated 14.12.2023 and 09.05.2025 affirmed; no order as to costs

Case: CG Tollway Ltd v. The Union of India & Ors.

Neutral Citation: 2026:RJ-JD:22539-DB

Case No.: D.B. Civil Writ Petition No. 15048/2025

Court: Rajasthan High Court, Jodhpur (Division Bench)

Date of Decision: 22 May 2026 (arguments concluded and judgment reserved on 5 May 2026)

Bench: Justice Arun Monga and Justice Sandeep Shah (author)

Relevant Acts & Sections: CGST Act, 2017 and RGST Act, 2017 – Sections 2(31), 2(119), 7, 9, 15, 73, 107, 112; Schedule II, Entry 6; CGST Rules, 2017 – Rules 27, 28; Notification No. 12/2017-CT (Rate) dated 28.06.2017 – Entries 23, 23A; Circular No. 150/06/2021-GST dated 17.06.2021; Article 226, Constitution of India

Impugned Order: Order dated 14.12.2023 of the Deputy Commissioner, State Tax, Business Audit-I, Bhilwara under Section 73; appellate order dated 09.05.2025 of the Appellate Authority, Commercial Tax Department, Ajmer; intimation letter dated 06.06.2025

Counsel: For the petitioner: Mr. Bharat Raichandani, Mr. R.S. Chouhan and Mr. Jitendra Mohan Choudhary. For the respondents: Mr. Mahaveer Bishnoi, AAG, and Mr. Harshvardhan Singh.

Source: Rajasthan High Court (official website)

Key Holdings of the Rajasthan High Court

• Where the GST Appellate Tribunal is not functional, the Section 112 remedy is otiose, and the writ may be decided on merits (para 18).
• "Consideration" includes payment in money or otherwise, including future payment; "supply" includes barter (paras 20–21).
• Building and maintaining a highway in return for toll rights, site licence and right of way satisfies the ingredients of barter (paras 30–32).
• The arrangement is a works contract service and was rightly treated as taxable (paras 32–33).
• Entry 23 covers toll collection simpliciter under Heading 9967; construction under Heading 9954 is not exempt, even when paid for by toll (paras 39, 42).
• Exemption notifications are construed strictly, with ambiguity resolved in favour of the Revenue (paras 40–42).
• No double taxation arises because the IRB sub-contract and the NHAI concession are distinct contracts (paras 34–36).

Brief Facts of the Case

NHAI entered into a concession agreement with the petitioner on 09.12.2016 for six-laning NH-79 from km 90.000 near Gulabpura to km 214.870 at the end of the Chittorgarh bypass (para 2). The project was on BOT (Toll) mode, requiring the petitioner to design, build, finance, operate and transfer the highway (para 2). It received the right to collect toll after commercial operation for the concession period (para 2).

The concession ran for 45 years under Clause 3.1.1 (para 25). Clause 26.1 fixed a concession fee of Re. 1 per annum plus a premium (para 27). Clause 26.2.1 required a premium of ₹2,28,60,00,000 after the third anniversary of COD, with annual escalations (para 27).

The petitioner sub-contracted road construction to IRB Infrastructure Developers Limited and collected toll itself (para 3). Internal Audit Report No. 15 dated 30.07.2023 recorded that it had paid no tax on ₹16,36,20,418 (para 4). Its reply is recorded as dated 28.07.2023 (para 5).

A show cause notice followed on 29.09.2023, answered on 07.12.2023 (para 5). The Deputy Commissioner's order dated 14.12.2023 confirmed GST of ₹16,36,20,418 with 10% penalty and interest (para 5).

The Section 107 appeal was dismissed on 09.05.2025 (para 6). An intimation letter dated 06.06.2025 directed deposit, and the writ followed (paras 1, 6).

Issues Before the High Court

1. Whether the writ is maintainable despite the remedy of appeal under Section 112 (paras 13–14, 18).
2. Whether the concession involves a "supply" by the petitioner to NHAI for "consideration" (paras 7, 15, 30–34).
3. Whether the toll-based consideration is exempt under Entry 23 of Notification No. 12/2017-CT (Rate) (paras 16–17, 37–42).
4. Whether taxing the petitioner is double taxation, given GST paid by the sub-contractor (paras 8, 34–36, 43–45).
5. Whether the petitioner is entitled to parity with dropped audit objections in Karnataka and Gujarat (paras 9–10, 51–54).

Court's Findings and Reasoning

Petitioner's case (paras 7–10): The petitioner argued that it rendered no service to NHAI, that toll was exempt under Entry 23, and that the circular covers only annuities (paras 7, 10). It relied on Larsen & Toubro and on dropped objections in other States (paras 8–10).

Revenue's case (paras 13–17): The AAG raised a preliminary objection that a Section 112 appeal lay, relying on Whirlpool and Glaxo Smith Kline (paras 13–14). On merits, he argued that Entry 23 is confined to Heading 9967, while construction falls under Heading 9954 (para 16).

Alternative remedy before GSTAT (para 18): The AAG frankly admitted that the Tribunal was not yet functional (para 18). The Court refused to deny relief on an otiose remedy and decided the merits (para 18).

Statutory framework and concession terms (paras 19–29): Consideration includes payment "in money or otherwise", supply includes barter, and Rule 27 values non-monetary consideration (paras 19–22). Clause 3.1.2 granted right of way, site licence and the right to collect fees, and Clause 10.2.2 granted licence rights "in consideration of the Concession Fee" (paras 25–26). NHAI had no privity with the sub-contractor (paras 28–29).

Barter and supply (paras 30–33): Premium was paid to NHAI and land was given on leave and licence (para 30). Even without premium, building and maintaining the road for toll rights satisfies barter (para 30). The arrangement falls within Section 7 and is a works contract under Section 2(119) and Schedule II Entry 6, with toll rights valued at around Rs. 2590 million (paras 32–33).

Entry 23 and Circular No. 150/06/2021-GST (paras 37–39): Only Heading 9967, covering toll collection, is exempt (para 39). Where roads are built and toll is collected as a reciprocal arrangement, no exemption applies (para 39). Toll collection here was essentially one of the considerations amounting to annuity (para 39).

Strict construction of exemptions (paras 40–42): Relying on Dilip Kumar and Safari Retreats, ambiguity in an exemption favours the Revenue (paras 40–41). The Court found no ambiguity anyway; exemption covers toll simpliciter, not toll collected as barter, particularly where premium is payable (para 42).

Double taxation and L&T (paras 34–36, 43–45): The double taxation argument "fizzles out" because the contracts are distinct (para 34). The sub-contractor's supply to the petitioner was separately taxable (para 35). L&T concerned VAT on goods in works contracts, not GST on services under a concession (paras 43–45).

GMR Pochanpalli followed (paras 46–50): The Telangana High Court upheld Circular No. 150/06/2021-GST in an identical BOT concession (paras 46–48). The Bench expressed "complete agreement" with that reasoning (para 50).

Parity with other States (paras 51–54): Dropped objections elsewhere do not bind the Court on a pure question of law, and there is no negative equality (para 51). The Karnataka objection concerned ineligible ITC in GSTR-9; the Gujarat one concerned GVAT composition (paras 53–54).

Application to facts (paras 55–56): The impugned orders were well reasoned, with no illegality (para 55). The judgment records no separate finding on the pleas of revenue neutrality and the CBIC letter dated 28.06.2021 (paras 10, 51–56).

Final Outcome and Directions

• Writ petition dismissed as bereft of merit (para 56).
• Orders dated 14.12.2023 and 09.05.2025 affirmed (para 56).
• No order as to costs (para 57).
• The judgment is silent on the intimation letter dated 06.06.2025, recovery timelines and any further appeal before GSTAT (paras 1, 56–57).

Legal Principle Laid Down

Under a BOT (Toll) / DBFOT concession, building and maintaining a highway for NHAI in return for toll rights, site licence and right of way is a supply by barter under Section 7, with toll rights as "consideration" under Section 2(31). Such construction is a works contract service under Heading 9954, and Entries 23 and 23A exempt only access to a road on payment of toll or annuity under Heading 9967, as Circular No. 150/06/2021-GST clarifies. Tax paid by an EPC sub-contractor on a separate contract does not make the concessionaire's supply double taxation (paras 30–42, 50).

Precedents Relied Upon

• GMR Pochanpalli Expressways Ltd v. Additional Director, DGGI, 2024 SCC OnLine TS 3988 – Relied upon – Circular No. 150/06/2021-GST upheld; construction under Heading 9954 not exempt. Discussed at paras 46–50.
• Commr. of Customs v. Dilip Kumar & Co., (2018) 9 SCC 1 – Relied upon – exemption notifications are strictly construed; ambiguity favours the Revenue. Discussed at para 40.
• Commr. (CGST) v. Safari Retreats (P) Ltd., (2025) 2 SCC 523 – Relied upon – interpretation of taxing statutes. Discussed at paras 40–41.
• State of Andhra Pradesh v. Larsen & Toubro Ltd., Civil Appeal No. 5239/2008, decided 26.08.2008 – Distinguished – a VAT case on goods in works contracts. Discussed at paras 43–45.
• Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1, and Asst. Commissioner (CT) LTU, Kakinada v. Glaxo Smith Kline Consumer Health Care Ltd., (2020) 19 SCC 681 – Cited by Revenue; not applied as GSTAT was not functional – alternative remedy. Discussed at paras 14, 18.
• Union of India v. Kaumudini Narayan Dalal, 2001 (10) SCC 231 – Cited by petitioner; not followed – consistency of Revenue's stand. Discussed at paras 10, 51.

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 18 (GSTAT not functional): "In view of the fact that the Tribunal is not functional till date, the petitioner in question cannot be refused to be entertained on the ground of availability of an alternate and efficacious remedy. This Court thus deems it appropriate to adjudicate the matter on merits rather than leaving the petitioner remediless."

Para 32 (barter): "Inasmuch as the petitioner supplies the works contract services to the NHAI and, in return, receives the right to demand and collect fees from the users, licence of the site, and right of way, thus all the ingredients of 'barter' are clearly available in the contract at hand."

Para 36 (distinct contracts): "Thus, both contracts are distinct and cannot be treated as overlapping. They are not part of the same transaction, nor is there any privity of contract between the NHAI and the sub-contractor."

Para 39 (no exemption for construction): "However, where construction of roads is undertaken and, pursuant thereto, as a reciprocal arrangement under the agreement, the toll is being collected, there is no exemption under that heading whatsoever."

Para 42 (toll simpliciter): "Exemption is only with regard to toll collection simpliciter and not for toll being collected for barter."

Para 51 (no negative equality): "The Court has been called upon to adjudicate a pure question of law, and simply because an office of the department has dropped identical objections does not preclude this Court to deliberate and decide the taxability of the petitioner. Even otherwise, there can be no concept of negative equality, as sought to be invoked by the counsel for the petitioner."

Practical Impact of the Ruling

• For BOT concessionaires: Toll-model concessionaires in Rajasthan face GST on construction, with toll rights treated as non-monetary consideration (paras 30–33, 39).
• For structuring: Sub-contracting construction to an EPC contractor does not shift the concessionaire's own liability (paras 35–36).
• For the department: Circular No. 150/06/2021-GST and GMR Pochanpalli now carry Rajasthan High Court endorsement for BOT (Toll) projects (paras 39, 50).
• For writ practice: The writ was entertained only because GSTAT was not functional; once it operates, Section 112 is the expected remedy (para 18).

FAQs on GST on BOT Toll Concession

1. What did the Rajasthan High Court hold in CG Tollway v. Union of India?

The Court held that GST on BOT toll concession arrangements is leviable. Building and maintaining a highway in exchange for toll rights, site licence and right of way is a barter and a taxable works contract supply (paras 30–33).

2. Is toll collected by a BOT concessionaire exempt under Entry 23?

Only toll collection simpliciter is exempt under Entry 23 (Heading 9967). Where toll is the reciprocal consideration for road construction under Heading 9954, the exemption does not apply (paras 39, 42).

3. How does Circular No. 150/06/2021-GST apply to BOT toll projects?

The Court held that the circular confirms construction of roads under Heading 9954 is not exempt, whatever the mode of deferred consideration. It agreed with the Telangana High Court in GMR Pochanpalli (paras 38–39, 50).

4. Is there double taxation if the EPC sub-contractor has already paid GST?

No. The sub-contract and the concession are distinct contracts, with no privity between NHAI and the sub-contractor. The sub-contractor's supply to the concessionaire is separately taxable (paras 34–36).

5. Can a writ be filed against a GST appellate order when GSTAT is not functional?

Yes, on these facts. The Court held that a writ cannot be refused for an alternative remedy before a non-functional Tribunal, and decided the case on merits (para 18).

Keywords: 2026:RJ-JD:22539-DB, CG Tollway Ltd v. Union of India, GST on BOT toll concession, Entry 23 Notification 12/2017-CT (Rate), Circular 150/06/2021-GST, Heading 9954, works contract Section 2(119), barter consideration Section 2(31), double taxation EPC sub-contractor, GSTAT not functional, tax litigation lawyer, Rajasthan High Court, Justice Sandeep Shah, Justice Arun Monga

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Download Judgment PDF – CG Tollway Ltd v. Union of India

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Source: Rajasthan High Court (official website).

Read more: Rajasthan High Court · GST · Infrastructure & Works Contract · Indirect Tax