Revenue sharing agreement

[Ashish Diwedi]

ABC enters into agreement for 25 years with XYZ (A charitable trust) for development, operation & management of Hospital on revenue sharing basis. XYZ owns land and has already constructed 30% of the hospital. ABC will develop, operate & manage the hospital by deploying its resources & man power and collect all revenue and share it as per agreed terms after its commissioning. All income derived from Hospital, being medical services will be exempt from GST. ABC will give ₹ 15 crore as deposit which is refundable after 25 years.

Will service of construction of balance 70% of hospital by ABC be liable to GST assuming the same as deemed joint venture? If yes, at what rate GST is applicable?

Is sharing of revenue of Hospital Income by ABC to XYZ liable to GST?

Deposit being refundable, will there be any GST implication on the same?

AI Summary

Taxability of construction services in long-term revenue-sharing hospital projects hinges on commercial character and concession treatment.
Construction of the balance hospital portion by the developer is treated as potentially taxable, with valuation governed by Valuation Rules and factual analysis of commerciality and risk allocation; BOT/concession principles may negate service-provider status where construction is undertaken on the concessionaire's own account. Revenue-sharing to the land-owning charitable trust is characterized as an actionable claim under Schedule III and treated as not liable to GST by one adviser, while refundable deposits are not automatically advances and their GST character depends on agreement terms and careful drafting.