Contractual tax variation clause: later GST reduction was prospective and did not defeat refund of the differential amount.

A contract clause making quoted rates inclusive of taxes and requiring refund of any tax decrease prevailing on the last due date for bids was applied to hold that a later reduction in GST did not relieve the contractor of the refund obligation. The reduction took effect only when the amending notification was issued, so the lower rate operated prospectively and did not alter the tax rate applicable on the bid date. The GST Council's recommendation by itself had no statutory force, and Article 265 was noted to confirm that tax can be levied or collected only under authority of law. The recovery demand for the differential tax was therefore sustained.

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Issues: Whether the petitioner was bound under the contract to refund the differential GST arising from reduction of tax rate after the last date for submission of bids.

Analysis: The contract expressly provided that the contractor's quoted rates were inclusive of taxes and that any decrease in the percentage rate of taxes directly related to contract value, as prevailing on the last due date for receipt of tenders, had to be refunded by the contractor or deducted from payments due. The rate applicable on the last date for submission of bids was 18%, and the subsequent reduction to 12% took effect only after the Government issued the amending notification on 21.09.2017. The GST Council's recommendation had no statutory force by itself. The reduced rate was therefore prospective, and the contractual clause governing tax variation applied on the basis of the rate prevailing on the last due date for bids. Article 265 of the Constitution of India was also noted to reaffirm that tax can be levied or collected only under authority of law.

Conclusion: The petitioner was liable to refund the differential tax and the challenge to the recovery demand failed.

Final Conclusion: The writ petition was dismissed as the contractual terms and the prospective statutory reduction in tax rate supported recovery of the differential amount from the contractor.

Ratio Decidendi: Where a contract links tax variation to the rate prevailing on the last due date for tenders, a later prospective reduction in the statutory tax rate does not displace the contractor's obligation to refund the differential amount.

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