2021 (2) TMI 142 - HC - GST

Court Orders Review of Builder Association's Representation on GST Challenges, Decision Expected After Hearing

The court directed the Chief Secretary of the Madhya Pradesh Government to review the representation by the Builders Association of India within three ... Direction to consider representation - speaking order after hearing - transitional application of indirect tax regime to pre-existing contracts - tax deduction at source in respect of running bills under transitional contracts - equal treatment of contractors engaged by State-owned corporations and other State departmentsDirection to consider representation - speaking order after hearing - The petition that the representation dated 02.01.2021 be considered and decided by the appropriate authority - HELD THAT: - The High Court did not adjudicate the substantive merits of the tax contentions raised in the representation. Having noted that the petitioner had filed a comprehensive representation with supporting documents, the Court directed the Chief Secretary, Government of Madhya Pradesh, to decide the representation by a speaking order and to afford the petitioner an opportunity of hearing. The direction is procedural and remedial in nature, requiring a fresh administrative decision within a prescribed timeframe rather than pronouncing on the legal issues raised in the representation.Chief Secretary directed to decide the petitioner's representation by a speaking order after providing opportunity of hearing within three months from production of the order.Transitional application of indirect tax regime to pre-existing contracts - tax deduction at source in respect of running bills under transitional contracts - equal treatment of contractors engaged by State-owned corporations and other State departments - Substantive questions concerning whether GST applies to contracts entered into before 01.07.2017, the consequence of GST vis-a -vis earlier VAT regime, and the practice of TDS deduction from running bills - HELD THAT: - These substantive tax issues were not finally adjudicated by the Court. The petitioners contended that implementation of GST from 01.07.2017 imposed additional liability on contractors under contracts executed prior to that date, and that TDS practices changed after the transition. The Court observed examples of State-owned corporations (MP Urban Development Corporation Limited and M.P. Road Development Corporation Limited) adopting measures to address GST impact, but did not resolve the legal questions on the merits. Instead, the Court remitted consideration of the representation - which encapsulates these contentions - to the administrative authority for decision. Thus, the legal controversies remain open for determination by the competent authority upon hearing the petitioner.Substantive issues concerning transitional application of GST and TDS practices were left for fresh consideration by the administrative authority and were not decided on merits by the Court.Final Conclusion: Writ petition disposed of by directing the Chief Secretary, Government of Madhya Pradesh, to decide the petitioner's representation dated 02.01.2021 by a speaking order after hearing the petitioner, within three months from production of a copy of this order; substantive tax issues raised in the representation were not decided and stand referred to the authority for fresh consideration. Issues:1. Representation for consideration of representation dated 02.01.20212. Differential amount of GST as against VAT3. Non-deduction of TDS post-GST implementation4. Applicability of GST to pending contracts5. Delegation of power for payment of additional liability arising from GST6. Standard Operating Procedure for GST payment claims7. Discrimination in treatment of contractors by State GovernmentAnalysis:1. The petition was filed by Builders Association of India, seeking direction for the consideration of their representation dated 02.01.2021 within two months. The association, registered under the Societies Registration Act, 1860, comprises builders and contractors engaged in infrastructure development projects for various state departments and local bodies in Madhya Pradesh. They highlighted the transition from VAT to GST regime post-July 2017, leading to a higher tax burden under GST, affecting their business activities and causing some members to halt work due to financial constraints.2. The petitioner's counsel argued that the differential amount of GST compared to VAT was approximately 8 to 10 percent higher, significantly impacting the trade. They also raised concerns about the non-deduction of TDS from running bills post-GST implementation, despite agreements being executed before July 2017. The absence of clear directives regarding TDS deduction post-GST implementation added to the financial challenges faced by the contractors.3. The notification implementing GST from July 2017 did not explicitly mention its applicability to pending contracts, creating ambiguity regarding the tax implications for ongoing projects. The petitioner emphasized the need for clarity and consistency in tax deductions and payments to ensure the smooth continuation of their contractual obligations.4. The court noted that the M.P. Urban Development Corporation Limited and M.P. Road Development Corporation Limited had issued orders delegating powers and laying down Standard Operating Procedures (SOP) for addressing GST payment claims in specific project contracts bid before July 2017. The petitioner argued for equal treatment of contractors across different state departments, emphasizing that discrimination based on the department of work execution was unjustified.5. Considering the comprehensive representation submitted by the petitioner to various government authorities, the court directed the Chief Secretary of the Madhya Pradesh Government to review the representation and provide a decision within three months, after offering a hearing to the petitioner's representative. This order aimed to address the concerns raised by the Builders Association of India regarding the GST-related financial challenges faced by its members, ensuring a fair and timely resolution to the issues presented in the petition.