The Central Government has prescribed a special GST procedure for road concessionaires operating under the Toll-Operate-Transfer (TOT) model. Notification No. 10/2026-Central Tax (Rate), dated 27 October 2026, introduces a mechanism linking GST payment on operation and maintenance (O&M) services to expenditure charged or debited from the project’s Escrow Account, effective from 1 November 2026.

1. Who Is Covered by the New GST Procedure?

The special procedure has been introduced under Section 148 of the Central Goods and Services Tax Act, 2017. It applies to registered concessionaires supplying O&M services to the concessioning authority during the concession period under a qualifying TOT concession agreement.

The agreement must provide for:

• Exclusive rights to demand, collect and appropriate tolls from a road or highway.

• Responsibility for operating and maintaining the road or highway during the concession period.

• Payment of the concession fee upfront by the concessionaire.

The concessioning authority may be the Central Government, a State Government, a Union territory, a local authority, a Governmental Authority or a Government Entity.

The procedure does not automatically apply to every road maintenance contract. Businesses must verify whether their concession agreement meets the prescribed conditions.

2. How Will GST Be Paid on O&M Services?

Under the new procedure, the registered concessionaire must pay the applicable central tax on O&M services based on the amount charged or debited from the Escrow Account maintained under the concession agreement towards eligible O&M expenditure.

The tax becomes payable in the tax period in which the relevant expenditure is charged or debited from the Escrow Account.

For example, if ₹10 lakh is charged or debited from the Escrow Account towards O&M expenses during a particular tax period, GST must be calculated on the relevant amount at the applicable rate, subject to the governing provisions.

This mechanism links the tax liability to actual O&M expenditure rather than requiring GST on the entire projected O&M component upfront at the beginning of the concession period.

3. Applicable Notifications and Effective Date

The principal notification is:

• Notification No. 10/2026-Central Tax (Rate), dated 27 October 2026: Prescribes the special procedure for central tax.

• Notification No. 10/2026-Integrated Tax (Rate), dated 27 October 2026: Provides the corresponding procedure for integrated tax.

• Notification No. 10/2026-Union Territory Tax (Rate), dated 27 October 2026: Provides the corresponding procedure for Union territory tax.

The notifications take effect from 1 November 2026. The applicable tax component will depend on the nature and location of the supply and the relevant GST provisions.

4. Compliance Steps for Road Concessionaires

Concessionaires should take the following steps before the effective date:

1. Review the concession agreement to establish eligibility under the TOT model.

2. Reconcile Escrow Account statements with actual O&M expenditure and supporting invoices.

3. Identify the tax period in which each relevant expenditure is charged or debited.

4. Configure accounting systems to capture the appropriate taxable amount and period.

5. Review GST returns and payment processes to ensure timely reporting and payment under the applicable provisions.

Proper documentation is particularly important where the concession fee, toll receipts and O&M expenditure are accounted for through different project accounts.

Conclusion

The new Section 148 special procedure provides a clearer mechanism for determining the amount and timing of GST payment on O&M services under qualifying TOT road concession agreements. From 1 November 2026, eligible concessionaires should align their accounting, Escrow Account reconciliation and GST compliance processes with the notified requirements.