2019 (8) TMI 858 - HC - GST

Construction contractor entitled to 10% GST difference on pre-GST contract under G.O.Ms.No.296 paragraph 10(a)

The HC addressed GST payment disputes arising from a construction contract dated 23.01.2015, which predated the GST regime. The contractor demanded 10% ... Payment of GST - the contract forms subject matter of these two petitions is dated 23.01.2015, which is prior to the GST regime - Construction Services - demand of difference of 10% GST on the original agreed contract value, so that the tax liability is in accordance with law that has become operational when contract was in vogue and work pursuant to the contract was in progress - HELD THAT:- This Court is informed that the aforesaid challenge to G.O.Ms.No.296, Finance [Salaries] Department, dated 09.10.2017 has been given legal quietus and therefore, G.O.Ms.No.296, Finance [Salaries] Department, dated 09.10.2017 is now operating. This takes us to the question as to which portion of G.O.Ms.No.296, Finance [Salaries] Department, dated 09.10.2017 is applicable - Here again, the task in instant writ petition is cut out as there is no disputation that paragraph 10(a) is applicable up to 30.06.2017 and paragraph 12 is applicable post 30.06.2017 i.e., on and from 01.07.2017. Therefore, the parties will now stand governed by paragraph 10(a) and paragraph 12 of aforesaid G.O.Ms.No.296, Finance [Salaries] Department, dated 09.10.2017 - The exercise of quantification qua para 10(a) shall be completed by both the parties as expeditiously as possible within 12 weeks from the date of receipt of a copy of this order. Though obvious it is made clear that work under the aforesaid contract shall continue without being impeded by this exercise. Petition disposed off. Issues:1. Interpretation of contract dated 23.01.2015 in light of GST regime.2. Dispute regarding payment of Goods and Service Tax (GST) under the Central Goods and Services Tax Act, 2017.3. Applicability of prescribed rates of GST for the contract.4. Challenge to Government Order G.O.Ms.No.296, Finance Department, dated 09.10.2017.5. Resolution of tax liability under GST for the contract.Analysis:1. The judgment concerns a contract between the Salem City Municipal Corporation and a company, dated 23.01.2015, for providing an underground sewerage system. The central issue is the payment of Goods and Service Tax (GST) under the Central Goods and Services Tax Act, 2017, as the contract predates the GST regime.2. The Court acknowledges that the GST regime became operational on 01.07.2017, after the contract was signed. The petitioner requested the corporation to pay GST, to which the corporation agreed to deduct 2% (1% State GST and 1% Central GST) at the time of payment. However, the prescribed GST rate for the contract is 12%, as per Chapter 24, Heading 9954, related to construction services.3. The petitioner filed writ petitions seeking the payment of the difference of 10% GST on the original contract value to align with the 12% tax liability under the law applicable when the contract was ongoing. The Court notes that the tax liability for the contract is indeed 12%, and the main issue is how this GST liability should be settled.4. The judgment delves into the legal history of a Government Order, G.O.Ms.No.296, Finance Department, dated 09.10.2017, which fixed the GST on works contracts for government work at 12%. The Order was challenged in court, but subsequent appeals upheld its validity, providing legal clarity on the applicable tax rates.5. The Court directs both parties to adhere to the provisions of paragraph 10(a) and paragraph 12 of the Government Order, which outline the negotiation and payment procedures regarding subsumed tax and GST for works contracts. The parties are given a timeline of 12 weeks to complete the quantification process while ensuring work under the contract continues uninterrupted.In conclusion, the writ petitions are disposed of with the directive for the parties to follow the Government Order for resolving the tax liability under GST, without the need for further orders or costs.