2024 (9) TMI 680 - HC - GST

Contractor wins refund of differential GST paid on pre-July 2017 works contracts under KVAT regime

The Karnataka HC ruled in favor of the petitioner contractor seeking refund of differential GST amount paid on works contracts. The court followed ... Refund the differential GST amount (being the difference between GST and VAT) paid by the petitioner for each of the works contract/composite supply executed by the petitioner - HELD THAT:- The issue decided by the Co-ordinate Bench in SRI CHANDRASHEKARAIAH, M/S. GOVINDE GOWDA AND SONS, M/S. D.K. CONSTRUCTIONS, M/S. SRI AYYAPPA CONSTRUCTIONS, M/S. ANNAPOORNESHWARI CONSTRUCTIONS, M/S. BHOOMIKA BUILDERS, VERSUS THE STATE OF KARNATAKA, THE UNION OF INDIA, THE GOODS AND SERVICES TAX COUNCIL, PRINCIPAL COMMISSIONER OF CENTRAL TAX, COMMISSIONER OF COMMERCIAL TAXES, CAUVERY NEERAVARI NIGAMA LIMITED, AND OTHER [2023 (6) TMI 93 - KARNATAKA HIGH COURT], where in the Co-ordinate Bench of this Court, has held 'The payments received by the Petitioners pre-GST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime – either under COT or VAT scheme as applicable.' The respondents are hereby directed to reimburse GST amount as indicated in the representations - The respondent / Department shall reimburse the said amount within a period of six weeks from the date of receipt of a copy of this order - petition allowed. Issues:1. Refund of differential GST amount paid by the petitioner for works contract/composite supply.2. Issuance of circular/policy by the State Govt addressing GST payment on works contract.3. Compliance with directions/guidelines for assessment of works executed pre-GST and post-GST.Analysis:1. The petitioner sought a writ mandamus for the refund of the differential GST amount paid for works contract/composite supply. The Co-ordinate Bench directed the State and other Govt agencies to calculate works executed pre-GST under KVAT regime, assess payments received pre-GST, calculate balance works post-GST, derive rates of materials, deduct KVAT amount, add applicable GST, and set off input credit against output GST. The concerned department was instructed to decide if agreements needed to be changed based on tax difference, sign supplementary agreements for revised GST-inclusive work value, and reimburse the petitioner for any differential tax amount.2. Additionally, the petitioner requested a circular/policy from the State Govt addressing GST payment on works contract executed under VAT regime. The Co-ordinate Bench reserved liberty for the petitioners to challenge subsequent orders or decisions by authorities and take legal recourse as necessary. The GST authorities were directed not to take precipitative action against the petitioners for six months from the date of the order.3. Another Co-ordinate Bench allowed a petition where the respondent Department was directed to reimburse a specific GST amount to the petitioner within six weeks. The Court emphasized the mandatory duty of the Department to reimburse GST amounts to contractors who have completed tender works post-GST implementation. The judgment highlighted the statutory obligation for service recipients to reimburse GST amounts to contractors, ensuring compliance with Section 13 of The Central Goods and Services Tax Act, 2017. The Court issued a writ mandamus for the reimbursement of the specified GST amount as per the representation provided by the petitioner.This detailed analysis of the judgment showcases the legal intricacies involved in seeking refunds of GST amounts, issuance of circulars/policies by the State Govt, and compliance with directions/guidelines for assessment of works executed pre and post-GST.