Disclaimer: Education only, not tax, legal or accounting advice. Tax provisions were renumbered under the Income-tax Act, 2025 from 1 April 2026, and GST rates and notifications change. Confirm each position with the current law and your auditors.

In simple words (if you are in class 10)

A toll road company is like a big shop that is open 24 hours. Money comes in every minute from tolls. Money goes out to people who repair the road, run the plazas, insure it and lend it money. The finance team does two big jobs:

  • P2P (procure to pay): buy things properly and pay the right people the right amount on time.
  • R2R (record to report): write every rupee in the books correctly, close the books each month, and prepare reports that lenders, auditors and investors trust.

The professional view

1. The P2P cycle in a highway SPV

Step Control that matters Free template
Vendor onboarding PAN, GSTIN and bank checks; MSME status (Udyam number); related-party flag Vendor master and onboarding checklist
Purchase order or work order Approval matrix by value; link to the O&M budget and major-maintenance plan Budget vs actual
Goods or service receipt Site engineer's measurement or IE certification for works
Invoice processing Three-way match (PO, GRN, invoice), with price and quantity tolerances Three-way match register
Tax checks TDS section and rate; GST ITC eligibility (see below) TDS payable tracker
Payment run Ageing, MSME due dates, escrow waterfall approval, maker-checker AP ageing and MSME payment planner
Vendor reconciliation Statement match every quarter; debit notes and retention Vendor statement reconciliation

MSME payments. Under section 15 of the MSMED Act, 2006, buyers must pay micro and small enterprises within the agreed period (at most 45 days), or within 15 days if nothing is agreed. Late payment carries compound interest at three times the bank rate (section 16). Under the income-tax law, unpaid amounts beyond these limits are disallowed until paid (section 43B(h) of the 1961 Act; check the matching provision in the 2025 Act). Track the Udyam category of every vendor.

TDS. Payments to O&M contractors, consultants, insurers' agents, lessors and lenders attract TDS. Under the 1961 Act these were sections 194C, 194J, 194I, 194A and others. From 1 April 2026 the rates sit in the section 393 tables of the Income-tax Act, 2025. Keep a mapping table in your TDS tracker so returns and Form 16A references stay consistent through the change.

GST. Services by way of access to a road or bridge on payment of toll are exempt from GST. A toll-only SPV therefore makes mainly exempt supplies, so most input tax credit on its O&M and major-maintenance purchases is not available (ITC on exempt supplies must be reversed). HAM concessionaires supply taxable construction and O&M services to the authority, so ITC planning is different. GST rates on works contracts have been changed more than once, so take them from the current rate notification.

2. The R2R close for a toll SPV

WD-2 to 0cut-offWD 1bank, escrowWD 1–2accrualsWD 2–3amortisation, MMWD 3–4IC, recsWD 5MIS, NDCF
A five-day close for a toll SPVIllustrative timetable; adapt it to your entity.
Day Activity Free template
WD-2 to WD 0 Cut-off: toll collection reports from the plaza system against bank credits from the acquiring bank; annual-pass compensation billed Toll revenue MIS
WD 1 Bank and escrow reconciliations; FASTag settlement differences Bank reconciliation
WD 1 to 2 Accruals for O&M, power, security and insurance; prepaid amortisation Accruals tracker, Prepaid schedule
WD 2 Amortisation of the toll intangible (revenue-based units of usage) and depreciation Fixed asset register
WD 2 Major-maintenance provision unwinding and re-estimate (Ind AS 37)
WD 2 to 3 Interest accrual, DSRA and MMRA balances, covenant check DSCR and covenant tracker
WD 3 Intercompany with HoldCo and InvIT: loans, interest, management fees Intercompany reconciliation
WD 3 to 4 Balance-sheet account reconciliations and review Balance sheet reconciliation
WD 4 Journal register sign-off; trial balance to Schedule III mapping Journal register, TB to Schedule III
WD 5 MIS, budget variance, NDCF (quarter or half-year) NDCF statement, Close checklist

3. Revenue recognition points that auditors test

  • Toll revenue is recognised when the vehicle passes, net of exemptions, under Ind AS 115. Reconcile plaza transactions, the NETC settlement report and bank credits every day, and age any unmatched items.
  • Annual-pass compensation is income receivable from NHAI under the supplementary agreement. Recognise it on the basis of eligible transactions and reconcile it each week against receipts.
  • HAM: under the financial-asset model, finance income on the receivable is recognised using the effective-interest method, and O&M income as the service is performed. See Ind AS accounting for toll roads and InvITs.

4. Typical journal entries (toll SPV, monthly)

Dr  Bank / FASTag settlement receivable       Cr  Toll revenue
Dr  Annual-pass compensation receivable        Cr  Other operating revenue
Dr  Amortisation of toll intangible            Cr  Accumulated amortisation (intangible)
Dr  Finance cost (unwinding of MM provision)   Cr  Provision for major maintenance
Dr  O&M expense                                Cr  Accrued liabilities (O&M contractor)
Dr  Finance cost                               Cr  Interest accrued on borrowings

5. InvIT-level reporting calendar (public InvIT)

  • Quarterly and half-yearly: financial results, NDCF and distribution declaration (at least every six months for public InvITs), with payment within 15 days of declaration.
  • Half-yearly or annual: valuation report by the registered valuer.
  • Annual: annual report, and the related-party and governance disclosures under the SEBI InvIT Regulations and the Master Circular.

The detail of the rules is in SEBI InvIT rules explained.

6. Ten controls an audit partner expects to see

  1. Daily toll reconciliation (plaza system, NETC, bank) with an ageing of breaks.
  2. Approval matrix and maker-checker on every payment from the escrow account.
  3. Vendor master change log with an independent review.
  4. MSME ageing and an interest computation.
  5. Three-way match with documented tolerance overrides.
  6. A major-maintenance provision model with the engineer's inputs and a back-test.
  7. A revenue-based amortisation model updated for the latest traffic forecast.
  8. Intercompany confirmations signed every quarter.
  9. Covenant compliance certificates tied to the trial balance.
  10. NDCF tied to the cash flow statement, with every adjustment referenced.

Sources

Education only. This page is not investment, tax, legal or accounting advice, and it does not recommend buying, selling or holding any security. Laws and rules change: check the linked primary source and consult a qualified professional before acting.

Last reviewed 25 October 2026. Spotted an error? Tell us and we will correct it.