Case clarifies VAT aspects vis-à-vis BOOT contracts

Governments across the globe enter into public-private partnerships for the development, financing, operation and maintenance of public infrastructure (both moveable and immoveable). Some such partnerships are in the nature of build, own, operate, transfer (BOOT) contracts.

In India these arrangements are typically awarded by the government (called the grantor) to a private sector player (operator) for building, operating and maintaining infrastructure meant for government/public use. The operator receives a service or user fee from the grantor or third parties at defined intervals for an agreed period of time. There are umpteen variants of the BOOT model and the taxability may vary accordingly.

Meghalaya High Court’s decision in Tata Consultancy Services Limited v The State of Meghalaya (2014) is one of the first high court decisions to consider the value-added tax (VAT) implications on contracts under the BOOT model.

Karthik Sundaram is an associate partner and Rajat Chhabra is a senior associate at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.