Contractor entitled to GST burden refund after implementation caused additional tax liability beyond original bid calculations

The Chhattisgarh HC allowed a petition seeking refund of additional tax burden suffered by a contractor due to GST implementation from July 1, 2017. The court held that the State Government's amended order dated September 30, 2022 for the Water Resources Department provided for reimbursement of additional tax burden to contractors upon furnishing details of differential tax liability. The court noted that contractors cannot be faulted for additional tax liability arising from new tax imposition, as bids are based on existing taxes. The court observed that the government had already issued similar reimbursement orders for other departments including PWD and urban development departments. The impugned order was set aside and petition disposed of favorably.

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Issues:
Refund of additional tax burden incurred due to GST regime introduction.

Analysis:
1. Background: The petitioner, a contractor, incurred additional tax burden due to the introduction of the Goods and Service Tax Act from July 1, 2017. The petitioner sought a refund for the extra tax paid during the execution of contracts awarded before the GST regime.

2. Previous Litigation: The petitioner had filed a writ petition earlier, directing them to approach the authorities for refund. However, the authorities rejected the claim citing contractual terms where the tax liability was on the contractor.

3. Government Orders: The Chhattisgarh government issued orders for various departments, including Public Works Department, Rural Road Development Agency, and Urban Administration Department, addressing the additional tax burden faced by contractors due to GST implementation.

4. Recent Development: The Water Resources Department amended the contract terms on September 30, 2022, to reimburse contractors for additional tax burdens incurred due to new taxes. The petitioner's case aligned with the amended provision of the contract.

5. Legal Arguments: The petitioner argued that the authorities' decision not to reimburse was harsh, as the contractor was not at fault for the additional tax liability arising from new taxes. The government had previously reimbursed contractors in similar cases, highlighting the arbitrary nature of the decision.

6. Constitutional Aspect: The rejection of the petitioner's claim was viewed as arbitrary and discriminatory under Article 14 of the Indian Constitution. The lack of uniform application of refund policies across government departments was criticized.

7. Judgment: The court set aside the impugned order and directed the petitioner to submit a fresh claim for the additional tax burden difference. The authorities were instructed to process the claim within three months and reimburse the petitioner accordingly.

8. Conclusion: The judgment emphasized the need for fair treatment of contractors facing additional tax burdens due to policy changes. It highlighted the importance of uniformity in refund policies across government departments to prevent arbitrary decisions and ensure justice for all contractors affected by tax law changes.

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