NHAI Issues Clarification on GST Applicability for O&M Components in EPC Projects

The National Highways Authority of India (NHAI), vide Policy Circular bearing reference no. 3.3.36/2026 dated May 9, 2026 (the “Circular”), has issued an addendum to its earlier clarification concerning the calculation of Goods and Services Tax (GST) on Operation and Maintenance (O&M) expenses in Engineering, Procurement and Construction (EPC) projects under the Change in Law mechanism. The clarification supplements NHAI’s earlier Policy Circular No. 3.3.26/2022 dated November 24, 2022, which addressed the calculation of GST implications arising from the revision in GST rates applicable to road construction activities with effect from July 18, 2022.

While the earlier circular addressed the calculation of GST implications arising from the revision in GST rates applicable to road construction activities from July 18, 2022, the present Circular further clarifies the manner in which the Change in Law percentage computed under the earlier circular is to be applied to the O&M component of EPC projects.

A central feature of the Circular is the distinction drawn between projects based on their bid due date, reflecting the differing GST structures applicable during those procurement periods.

For projects where the last date for submission of bids was on or before June 30, 2017, the Circular identifies two situations, namely O&M work completed on or before July 17, 2022, and O&M work completed on or after July 18, 2022. It clarifies that the Change in Law percentage computed under Annexure-I of the earlier circular shall apply to O&M expenses based on the corresponding invoice period.

Accordingly, the percentage computed for the project’s post-GST work executed up to July 17, 2022 shall apply to all O&M invoices raised up to July 17, 2022, while the percentage computed for the project’s post-GST work executed after July 17, 2022 shall apply to all O&M invoices raised after July 17, 2022.

The Circular separately addresses projects where the bid due date was on or after June 16, 2021. In such cases, it clarifies that GST shall be payable at the applicable rates, since bids invited from June 16, 2021 onwards were sought exclusive of GST.

The Circular further advises Project Implementation Units (PIUs) to forward GST liability calculation files relating to projects covered under Paragraph 2(i) to the GST Cell at NHAI Headquarters for scrutiny and vetting by GST consultants or auditors. Payments under the Change in Law mechanism are to be released by the concerned PIUs with the approval of the respective Regional Office (RO).

The Circular provides additional guidance regarding the applicability of GST-related Change in Law adjustments to O&M expenses across different project categories and invoice periods. The clarification may assist in promoting consistency in the assessment and processing of claims under EPC projects governed by the Change in Law framework.