HAM Road Contracts explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A Hybrid Annuity Mode contract with NHAI is a single agreement covering construction of a highway and its operation and maintenance, sometimes for fifteen or twenty years. The concessionaire receives a portion of the cost during construction and the balance as annuities spread across the O&M period, with interest.
Two readings were possible, and they produced very different cash flows for the concessionaire.
Circular No. 221/15/2024-GST dated 26 July 2024 chose one.
A HAM contract is to be looked at holistically, based on the services the concessionaire performs, rather than fragmented into a construction supply and a separate maintenance supply. It is a continuous supply of services with periodic payment obligations, so s.31(5) governs the invoice, and the tax point follows the instalment or annuity due date. Tax is not payable up front on the full construction value at completion of construction.
The two readings
Reading one — fragmented. Construction is a discrete supply completed when the road is built. Tax on the entire construction value falls due then, even though most of the money will arrive over the following twenty years. The O&M is then a separate continuous supply.
Reading two — holistic. The contract is one composite arrangement, with staggered payment terms that hold the concessionaire accountable for both building and maintaining the highway. It is a continuous supply of services, and the tax point follows the payments.
The first reading creates a very large early liability against payments not yet received — a working-capital problem severe enough to affect project viability. The circular adopted the second.
What the circular says
The ICAI commentary records the reasoning: a HAM contract is a single contract for construction as well as operation and maintenance of the highway; the payment terms are so staggered that the concessionaire is held accountable for the repair and maintenance of the highway as well; and the contract needs to be looked at holistically based on the services to be performed by the concessionaire.
Read that way, the arrangement satisfies s.2(33) — a supply provided or agreed to be provided continuously or on a recurrent basis under a contract, for a period exceeding three months, with periodic payment obligations.
The consequence: section 31(5)
Once the arrangement is a continuous supply of services, s.31(5) applies.
Where the due date of payment is ascertainable from the contract — which it invariably is in a concession agreement with a defined annuity schedule — the invoice must be issued on or before that due date. The time of supply follows under s.13(2).
So:
- during the construction period, tax follows the construction instalments as they fall due;
- during the O&M period, tax follows the annuity instalments as they fall due;
- no liability crystallises on the completion of construction as such.
Continuous supply of services and section 31(5) →
The interest component
Annuities under a HAM contract typically carry an interest or finance component reflecting the deferral.
Where interest is charged for delayed payment of consideration, s.15(2)(d) includes it in the value of the supply — at the rate applicable to that supply, not at a separate rate.
Where the interest is a contractually agreed component of the annuity itself, rather than a charge for delay, the analysis is that it forms part of the consideration for the continuous supply, and is taxed with it. Concession agreements should be read closely on this point, because the characterisation determines both the value and the rate.
Beyond HAM: the general principle
The circular is written for NHAI HAM projects, but the reasoning has wider reach. Wherever a single infrastructure or concession contract:
- covers construction plus a long operating obligation;
- is paid through staggered instalments or annuities; and
- is structured so that payment is contingent on continued performance,
the holistic reading and the continuous supply analysis are available on the same logic.
That covers a range of PPP structures — annuity road projects outside HAM, some BOT variants, and long-term O&M-linked supply contracts in power and water.
It does not convert every long contract into a continuous supply. The definition still requires periodic payment obligations under the contract, and a contract paying a lump sum on completion with a separate maintenance agreement is two arrangements, not one.
Practical notes
- Anchor the analysis in the concession agreement's payment schedule. It is the evidence for both the continuous supply characterisation and the s.31(5)(a) due dates.
- Invoice on or before each due date, not on receipt. Late invoicing moves the tax point to the date of provision of service under s.13(2)(b) without improving the timing.
- Non-receipt does not defer liability. An annuity that falls due and is not paid still creates a tax point.
- Separate the interest component in the contract and in the invoice, and take a documented position on its treatment.
- Reconcile to GSTR-9C. A long project with annuity-based tax points will show a permanent books-to-returns timing difference that must be explained.
Key takeaways
- Circular No. 221/15/2024-GST directs a holistic reading of a HAM contract.
- The arrangement is a continuous supply of services under s.2(33).
- s.31(5)(a) applies — invoice on or before each payment due date.
- No lump-sum liability arises on completion of construction.
- The interest component of an annuity needs a documented characterisation.
- The reasoning extends to other annuity-based concession structures on the same facts.
Read next
- Continuous Supply of Services and Section 31(5)
- Works Contract: Why It Is Not a Composite Supply Question
- GST on Works Contract for Government Projects
- Inclusions in Value of Supply
Disclaimer: Positions stated as on 5 September 2026, based on ICAI Background Material on GST, Volume I (2026 edition) and Circular No. 221/15/2024-GST.