GST Rate Dispute: Petition Against Audit Report Dismissed as Premature Under Section 65(6) of CGST Act

The HC dismissed a writ petition challenging an audit report that determined 18% GST applicable on a government works contract instead of 12% as claimed by the petitioner. The court found the petition premature as the audit report under Section 65(6) of CGST Act was merely a preliminary step requiring further adjudication, not a final recovery order. The respondent authority confirmed no immediate recovery action would be taken. While dismissing the petition, the court extended the deadline for the petitioner to submit its reply to the tax demand, ensuring adequate opportunity to present its case before final determination of tax liability.

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Issues:
1. Discrepancy in GST rate calculation for works contract executed for a government concern.
2. Validity of audit report and tax ascertained payable under CGST Act.
3. Prematurity of the writ petition filed by the petitioner.

Analysis:
1. The petitioner, a registered dealer under the CGST Act, executed works contract for a government concern and believed it was liable to pay GST at 12%. However, the respondent authority audited the petitioner and demanded 18% GST. The petitioner sought quashing of the audit report and tax demand, contending that as the concern was a government entity, only 12% GST was applicable.

2. The audit report issued under Section 65(6) of the CGST Act was found to be a preliminary step, not initiating recovery proceedings. The respondent clarified that the audit report and tax demand were subject to further adjudication, with the petitioner having the opportunity to present reasons before a final decision on tax liability. The court noted that no recovery was contemplated immediately after the audit report, as per the provisions of Section 65(6) of the CGST Act.

3. The court observed that the intimation of tax ascertained payable under Section 73 of the CGST Act allowed the petitioner to show cause before any further action was taken. As the petitioner was required to respond by a specific date, the court extended the deadline to allow the petitioner ample time to present its case. Despite the premature nature of the writ petition, the court dismissed it, granting the petitioner an extended period to submit its reply.

In conclusion, the court found that the audit report and tax demand were part of a process that required further adjudication and consideration of the petitioner's submissions. The court extended the deadline for the petitioner to respond, emphasizing the importance of allowing the petitioner a fair opportunity to present its case before any final decision on tax liability was made.

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