Contractors can claim refund of excess 6% GST paid on works contracts before July 2022

Chhattisgarh HC disposed of petitions seeking refund of 6% additional GST paid for works contracts executed prior to 18.07.2022. Following precedent in M/S D.A. Enterprises case, the court directed petitioners to make fresh claims before respondent authorities showing difference between tax liability at bid submission and excess tax paid after GST introduction. Authorities were directed to conduct scrutiny and enquiry, and if petitioners proved entitlement to additional tax burden reimbursement, they should be suitably compensated.

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Issues involved:
The judgment involves a declaration sought by petitioners regarding the inapplicability of a GST rate notification for works contract services executed before a certain date and the entitlement to a refund of additional GST paid. The main issue revolves around the retrospective application of the amended GST rate and the refusal of the respondent state authorities to grant refunds to the petitioners.

Details of the Judgment:

Issue 1: Declaration of inapplicability of GST rate notification
The petitioners, involved in construction projects, challenged the applicability of a GST rate notification for works contract services executed before a specific date. They argued that retrospective application of the amended GST rate is unreasonable, illegal, and violates fundamental rights under the Constitution of India. The petitioners claimed that they bid based on the 12% GST rate at the time, and applying the increased rate retrospectively is impermissible in law. Reference was made to a previous court order and a Supreme Court judgment to support their case.

Issue 2: Refund of additional GST paid
The petitioners contended that the respondent state authorities failed to grant a refund of the 6% additional GST liability imposed on works contracts executed before a certain date. They highlighted the inconsistency in the treatment of contractors by different government departments regarding reimbursement of additional tax burdens. The court referred to a previous case where the government had decided to reimburse such additional tax burdens and directed the petitioners to make a fresh claim for refund, ensuring due scrutiny and reimbursement within a specified timeline.

Conclusion:
The High Court, after considering the arguments from both parties and the precedent set in a previous case, directed the petitioners to make a fresh claim for refund of the additional tax liability. The court emphasized the need for a fair and uniform approach in dealing with such claims and ordered the respondent authorities to process the claims promptly, ensuring reimbursement if found entitled. The judgment aims to address the grievances of the petitioners regarding the retrospective application of the GST rate and the lack of refund mechanisms, providing a pathway for resolution within a specified timeframe.

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