Andhra Pradesh High Court Quashes 18% GST on Public Road Works, Orders Fresh Assessment Using IALA Certificate

“Andhra Pradesh High Court Quashes 18% GST on Public Road Works, Orders Fresh Assessment Using IALA Certificate”

“Court says industrial area roads are public in nature, not taxable at higher GST rate”

“Judgment offers clarity for contractors and sets precedent for infrastructure taxation”

By Our Legal Correspondent

New Delhi: January 03, 2026:

In a landmark ruling, the Andhra Pradesh High Court has set aside the levy of 18% Goods and Services Tax (GST) on road works executed within industrial areas. The Court observed that such roads are public in nature and therefore should not attract the higher GST rate applicable to private works contracts.

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The Bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar directed the tax authorities to conduct a fresh assessment based on the Industrial Area Local Authority (IALA) certificate, which certifies that the roads serve public purposes. This judgment provides relief to contractors and clarifies the tax treatment of infrastructure projects.

This judgment is expected to have significant implications for contractors, industrial authorities, and state governments across India.

Case Background

• Contractors executing road works in industrial areas were subjected to 18% GST, treating the projects as private works contracts.
• The contractors argued that the roads were public infrastructure, maintained by the Industrial Area Local Authority (IALA).
• The IALA issued certificates confirming the public nature of the roads.
• The High Court ruled that such certification must be considered and ordered reassessment.

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Court’s Observations

1. Public nature of roads: Roads within industrial areas are used by the public, not restricted to private entities.
2. Role of IALA certificate: The certificate is a valid document proving the public character of the project.
3. Wrongful levy of GST: Imposing 18% GST on public road works is unjustified.
4. Fresh assessment: Authorities must reassess the tax liability considering the IALA certification.

Comparison Table: GST on Road Works

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Implications of the Ruling

• For contractors: Significant relief as projects will not attract 18% GST, improving margins.
• For industrial authorities: Recognition of IALA’s role in certifying public infrastructure.
• For state governments: Clarifies taxation policy for industrial area projects.
• For taxpayers: Ensures fair treatment and prevents wrongful levy of taxes.

Wider Context

• GST disputes in infrastructure: Similar disputes have arisen in solar projects, housing works, and composite contracts. Courts have often intervened to clarify tax treatment.
• Policy clarity needed: The ruling highlights the need for clearer GST guidelines on public vs private infrastructure.
• National impact: Other High Courts may adopt similar reasoning, creating uniformity across states.

Expert Views

• Tax lawyers: Say the ruling strengthens the principle that public infrastructure should not be taxed like private contracts.
• Contractors’ associations: Welcome the judgment as a boost to the construction sector.
• Policy analysts: Note that the ruling may push the GST Council to issue clarifications on infrastructure taxation.

Conclusion

The Andhra Pradesh High Court’s ruling is a landmark in GST jurisprudence. By setting aside the 18% levy on public road works and directing reassessment based on the IALA certificate, the Court has ensured fairness in taxation and protected contractors from undue burden.

This judgment not only clarifies the tax treatment of industrial area roads but also sets a precedent for similar disputes nationwide. For India’s infrastructure sector, it is a step toward greater transparency, reduced litigation, and improved ease of doing business.

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