GST on toll tax is nil. Entry 23 of Notification No. 12/2017-Central Tax (Rate) classifies access to a road or bridge on payment of toll as an exempt service, so the amount you pay at a plaza or that gets deducted from your FASTag is the full charge with no tax component sitting inside it.1Central Board of Indirect Taxes and Customs. Notification No. 12/2017 – Central Tax (Rate)
The Exemption at the Toll Plaza
The Central Government issued Notification No. 12/2017 under Section 11 of the CGST Act when GST launched in 2017. Entry 23 sets the rate at nil for “service by way of access to a road or a bridge on payment of toll charges” under Heading 9967, with no conditions attached.1Central Board of Indirect Taxes and Customs. Notification No. 12/2017 – Central Tax (Rate)
Who runs the plaza does not matter. Whether NHAI collects directly or a private concessionaire operates the booth, the person paying toll owes no CGST, no SGST, and no IGST. A separate entry, Entry 23A, applies the same nil rate to road or bridge access paid through annuity rather than per-trip toll, so both forms of user charge for simply driving on the road stay outside GST.2Central Board of Indirect Taxes and Customs. Circular No. 150/06/2021-GST – Clarification Regarding Applicability of GST on the Activity of Construction of Road
FASTag Service Charges Are Not Exempt
The toll deducted from your FASTag is exempt. The fees around FASTag are not. Banks and payment platforms charge tag issuance fees, annual maintenance fees, and convenience fees for online recharges, and those charges attract GST because they are banking and payment processing services, not road access.
Read your FASTag statement line by line. The toll deduction carries no tax. A convenience fee on an online recharge or an annual tag fee will include GST. Both flow through the same wallet, but only one is exempt.
Businesses Cannot Claim Input Tax Credit on Tolls
Businesses normally recover GST paid on inputs by claiming input tax credit against their output liability. Toll charges break that chain because no GST is paid to begin with. Section 17(2) of the CGST Act restricts input tax credit to the extent that goods or services are used for taxable supplies, and since toll is an exempt service at a nil rate, there is nothing to recover.3Central Board of Indirect Taxes and Customs. CGST Act Section 17 – Apportionment of Credit and Blocked Credits
This catches some logistics and transport operators off guard. Fuel purchases carry GST and generate input credit. The toll expense sitting next to fuel on the same trip does not. Toll charges hit the profit-and-loss statement as a straight operating expense with no GST offset.
On the income tax side there is relief. Section 37(1) of the Income Tax Act allows any revenue expenditure that is not capital in nature and not already covered by a specific deduction section as a deductible business expense.4Income Tax Department. Income Tax Act Section 37 – General Toll paid on business travel fits. So while GST is not recoverable, tolls reduce taxable income. Keep FASTag statements and toll receipts with plaza name, vehicle category, date, and transaction ID for assessment.
Where GST Does Apply Around Tolls
The exemption is narrow. It covers the act of using the road, not building it or operating the plaza.
Road Construction
Road access falls under Heading 9967 and is nil-rated. Road construction falls under Heading 9954 and is fully taxable. Works contracts for building roads, bridges, and tunnels for general public use attract 12% GST (6% CGST plus 6% SGST) under Notification No. 20/2017-Central Tax (Rate).5Central Board of Indirect Taxes and Customs. Notification No. 20/2017 – Central Tax (Rate) Contractors charge GST on construction invoices and claim input credit on cement, steel, equipment, and other taxable inputs. Tax flows normally through the construction chain. Only the final service of letting someone drive on the finished road gets the exemption.
Annuity Payments in Hybrid Annuity Model Projects
For several years the highway construction industry treated NHAI annuity payments to developers as exempt under Entry 23A, arguing they were payments for road access. The GST Council’s 43rd meeting in May 2021 rejected that reading. Circular No. 150/06/2021-GST clarified that Entry 23A covers only services under Heading 9967, not construction under Heading 9954. Annuity payments in HAM projects are deferred payments for construction, so they attract 12% GST.2Central Board of Indirect Taxes and Customs. Circular No. 150/06/2021-GST – Clarification Regarding Applicability of GST on the Activity of Construction of Road The clarification applies from 1 July 2017.
Toll Operator Management Fees
A private company that runs a plaza under contract with NHAI collects exempt toll from drivers and charges no GST on those collections. The management and operation fees it earns from NHAI, however, are taxable services under the standard framework. Operators providing both exempt and taxable services must apportion their input credits between the two under Section 17(2), and getting that split wrong is a common audit issue in the sector.3Central Board of Indirect Taxes and Customs. CGST Act Section 17 – Apportionment of Credit and Blocked Credits