Road restoration charges paid by gas pipeline company to PWD are a taxable supply of service under RCM; not exempt under Notification 12/2017 or 14/2017: GSTAT Lucknow

In a batch of five appeals, the Tribunal held that custom, request-driven road repairs executed for a private commercial entity's pipeline rollout lose the sovereign immunity available to routine public road maintenance.

In a batch of five appeals involving identical facts but different tax periods (June to December 2020), the Goods and Services Tax Appellate Tribunal, Lucknow Bench, has dismissed the appeals of a natural gas distribution company seeking refund of GST paid under the reverse charge mechanism on road restoration charges paid to the Public Works Department, holding that the charges constitute taxable supply of service [Torrent Gas Limited v. Commissioner, CGST & Central Excise, Kanpur — Batch of 5 Appeals].

The Bench of Santosh Kumar Srivastava (Judicial Member) and Arvind Kumar (Technical Member) held that the transaction was entirely distinct from unilateral compensation or liquidated damages. The appellant had voluntarily applied to the PWD for permission to cut open public roads to lay its gas pipeline, and the PWD performed a distinct, physical asset-repair service calculated on the basis of structural excavation volume — establishing bilateral transactional reciprocity under Section 2(31) of the CGST Act.

The Tribunal rejected the appellant's reliance on Notification No. 14/2017-Central Tax (Rate) and the sovereign function argument under Articles 243G and 243W, holding that while routine road upkeep for the general public is a sovereign function, custom request-driven road repairs executed specifically to facilitate a private commercial entity's pipeline rollout lose all sovereign tax immunity. Serial No. 6(d) of Notification No. 12/2017 explicitly excludes any service provided by a government or local authority to a business entity from general tax exemption.

The Tribunal also rejected the contentions that road restoration charges are compensatory damages within the meaning of Circular No. 178/10/2022-GST, that favourable refund orders in Rajasthan and Punjab constituted binding precedent, that the absence of DIN invalidated the proceedings, and that dual RCM incidence arose — noting that no evidence of the PWD having raised a GST invoice under the forward charge mechanism was on record. All five appeals were dismissed, with aggregate refund claims of approximately Rs. 80 lakh upheld as valid statutory RCM payments.

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