Relief for works contractor: excess GST over pre-GST VAT reimbursable, no interest, penalty or limitation applicable

HC held that the petitioner, a works contractor who had paid GST instead of VAT for contracts executed under the pre-GST regime, is entitled to reimbursement of the differential tax. Relying on earlier coordinate Bench decisions, HC reiterated that taxpayers similarly situated may file or amend GST returns to reflect the correct differential tax without interest, penalty, or limitation. Applying this principle, HC directed the respondents to reimburse the excess GST paid by the petitioner as indicated in its representations. The writ petition was accordingly allowed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a writ of mandamus can be issued directing the respondent-employers/department to refund or reimburse the differential GST amount paid by the petitioner-contractor on works contracts, in light of prior binding decisions of the Court.

1.2 Whether the petitioner is entitled to reimbursement of GST amounts indicated in its representations, where GST has been paid by the contractor but not borne or reimbursed by the respondent-employers.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Mandamus for refund/reimbursement of differential GST paid by contractor on works contracts; entitlement to reimbursement of GST as per representations

Legal framework (as discussed in the judgment)

2.1 The Court refers to and relies upon a prior decision of a Co-ordinate Bench which laid down detailed directions/guidelines for works contracts straddling the pre-GST KVAT regime and the post-GST regime, including:

(a) Assessment of works executed and payments received prior to 01.07.2017 under the KVAT regime, under either COT or VAT schemes as applicable.

(b) Identification and calculation of balance works to be completed or completed after 01.07.2017 under the original contracts.

(c) Derivation of the rate of materials and KVAT items required/used for balance works, deduction of KVAT and service tax, and addition of applicable GST.

(d) Computation of input tax credit on materials to be set off against output GST where assessed under regular VAT.

(e) Calculation of "tax difference" on the balance works and determination of necessity for modification of agreements, including execution of supplementary agreements to provide for revised GST-inclusive work value and reimbursement of differential tax amounts by the employer.

2.2 The Court also relies on another Co-ordinate Bench decision which, with reference to Section 13 of the Central Goods and Services Tax Act, 2017, held that where the tender process and allocation of work are post-GST and the contractor, being a registered service provider, has completed works and is under a statutory duty to pay GST, the service-recipient department is under a corresponding "bounden duty" to reimburse the applicable GST amount, and that failure to do so justifies issuance of a writ of mandamus.

Interpretation and reasoning

2.3 The Court notes that the petitioner's prayer for refund/reimbursement of the differential GST is founded on, and supported by, the law laid down by the Co-ordinate Bench in the earlier writ petitions concerning works contracts transitioning from KVAT to GST.

2.4 The Court extracts and adopts the prior directions/guidelines regarding calculation of tax liabilities for pre-GST and post-GST portions of works contracts and the obligation of the employer department to revise contract values where necessary and to reimburse or pay the differential tax amounts to the contractors.

2.5 The Court further takes note of the later Co-ordinate Bench ruling that, where the works and tenders are in the post-GST regime, the contractor's statutory liability to pay GST to the tax department implies a corresponding obligation on the part of the employer department, as service recipient, to reimburse the GST, and that inaction by the department warrants a direction in the nature of mandamus.

2.6 Applying these binding Co-ordinate Bench decisions to the present matter, the Court observes that the issue raised by the petitioner "stands answered" and therefore the petitioner's substantive relief for reimbursement of GST as claimed in its representations must be granted.

Conclusions

2.7 The Court concludes that, in light of the prior Co-ordinate Bench decisions on transitional contracts under KVAT and GST and on post-GST works contracts, the respondents are under a legal obligation to reimburse the GST amounts borne and paid by the petitioner-contractor.

2.8 The Court allows the writ petition and issues a mandamus directing the respondents to reimburse the GST amounts as indicated in the petitioner's representations dated 12.06.2023, 15.06.2023 and 24.07.2023.

2.9 The Court directs that the respondents/department shall complete such reimbursement within a period of six weeks from the date of receipt of a copy of the order.

---