GST levy on annuity payments of BOT-HAM projects will have limited impact on project cash flows, domestic rating agency Icra on Wednesday.

       "With NHAI reimbursing additional tax burden on account of GST levy on annuity payments for BOT (build-operate-transfer)-HAM (hybrid annuity model) projects, there would be no impact on the cashflows, project debt coverage and return metrics of the concessionaire," Vinay Kumar G, assistant vice-president and sector head (corporate ratings) of ICRA, said in a statement.

       For projects bid between July 1, 2017, and October 13, 2017, NHAI would not reimburse the GST on annuity under the change in law as bids were invited inclusive of GST, it said.

       During the period, HAM projects with an approved total project cost of Rs 4,329.9 crore were awarded.

       The GST Council, through its clarification dated June 17, 2021, and subsequent policy circular issued by the National Highways Authority of India (NHAI) on September 1, 2021, has made 12 per cent GST applicable on annuity payments for HAM projects, received during the operations period.

       So far, goods and services tax (GST) for BOT-HAM projects is applicable on the grants received from the authority during the construction period and the O&M (operation and maintenance) payments received during the operations period.

       However, clarity was missing on the applicability of GST on the annuity payments received during the operations period due to differing interpretations of GST notifications and other appellate rulings, according to the statement.

       "The concessionaires can use the accumulated input tax credit (ITC) during the construction period to set off the GST liability on annuity payments received during the operations period.

       "Thus, the impact of GST liability on annuity was expected to be limited on the project return metrics with cash outflow towards GST liability being restricted to the last three-year period of operations," the statement said.

       However, as per the latest circular issued by NHAI on September 1 this year, NHAI will reimburse the net impact of additional GST on an annuity (adjusted for ITC) to the concessionaire under the change in law for projects bid on or before June 30, 2017, and between October 14, 2017, and June 16, 2021, it added.

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