TaxTMI 
TaxTMI 
2023 (6) TMI 93
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....incipal Commissioner Of Central Tax, Commissioner Of Commercial Taxes, Cauvery Neeravari Nigama Limited, and Other For the Petitioners (By Sri. D.R. Ravishankar, Senior Counsel Appearing For SrI. Naveen Gudikote S, Advocate) For the Respondents (By Sri. Hema Kumar, AGA FOR R1, R5 & R6; SMT. M.R. Vanaja, Advocate For R2, R7 & R8; Sri. Amit Anand Deshpande, Advocate For R3 & R4; Smt. M.P. Geetha Devi, Advocate For R-10; Sri. G.B. Sharath Gowda, Advocate For R-11; Sri. Deshraj, Advocate For R-18; Sri. Rudrabhushan C Benakanalli, Advocate For R-19; SRI. T. Swaroop, Advocate For R-22; Sri. P.D. Surana, Advocate For R-23; SRI. H.N. Shashidhara, Advocate For R-26 & R-56; SRI. G.M. Ananda, Advocate FOR R-29; Smt. K.S.Anasuyadevi, Advocate For R-47; Sri. A.Nagarajappa, Advocate For R-52 & R-60; Sri. B.L. Sanjeev, Advocate For R-57; Sri. K.S.Bheemaiah, Advocate For R-58; Sri. H.R.Showri, Advocate For R-59; Sri. M R C Ravi, Advocate For R-61; Sri. A. Ravishankar, Advocate For R-62; R9, R12 To R14, R16, R17, R20, R21, R24, R25, R27, R28, R30, R32, R34, R36, R37, R38, R39, R40, R41, R42, R43, R44, R45, R46, R48, R50, R51, R53 To R55 Are Served; Vide Order Dated 19.11.2019, No....
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....onal tax by way of GST after 01.07.2017, which is a huge differential tax burden not envisaged at the time of entering into agreements under the COT/KVAT schemes during the KVAT regime and as such, petitioners are before this Court by way of these petitions. 3. The Petitioners herein are class-I contractors who have entered into 'works contract' with various State Govt agencies as employers and petitioner contractors and the agreements were entered into at a point of time when the KVAT Act and Finance Act 1994 were in force. It is the contention of the Petitioners that they were registered under KVAT by obtaining TIN number and after introduction of GST from 01.07.2017, they have obtained GST registration numbers specifically and individually. Most of the Petitioners are covered under the composition scheme in terms of Section 15 read with Rule 135 of the KVAT Act except for a few Petitioners who are under the regular VAT assessment under KVAT Act. For the Petitioners who are covered under the composition scheme, the tax under KVAT Act was at 4% on the transaction value of the contract and for those who are covered under the regular VAT assessment, it was either 5% or 12% as the....
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....seller pays GST for the Government and collects it from the buyer on the invoice. The Petitioners who have rendered service to the Respondent State Govt agencies, are required to collect and pay the taxes. The Petitioners had given representations to the 1st Respondent wherein the Petitioners have contended that the Central Government more particularly the Department of Railways has come out with a scheme for the purpose of ensuring additional burden of tax as per GST regime is absorbed by the Department while taxing under the GST. It is contended that the taxable incidence as per Act in so far as contractor is concerned is fixed and the tax on the differential amount in the invoice would have to be borne by the recipient of the service i.e., the employer. It is contended by the Petitioners that the State of Maharashtra, State of Odisha, State of Andhra Pradesh & Telangana and even in State of Karnataka the differential amount has been ordered to be paid to the contractors and that the Petitioners have to treated the same way as per principles of parity. It is contended that the Petitioners had given representations to the 1st Respondent Government to come out with guidelines to ab....
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....te orders deserve to be passed in the present petitions. In support of his contentions, learned Senior counsel placed reliance upon the State Government Circulars dated 03.01.2020 and 14.12.2020 as well as upon the following decisions:- (i) MAS Constructions vs. Hubballi Dharwad Smart City Limited - W.P.No. 2804/2021 dated 22.09.2021; (ii) Dhalbaleshwar Pattnaik vs. State of Orissa - 2020 SCC Online ORI 623; (iii) Subaya Construction Limited vs. Tamilnadu Water Supply and Sewage Board - WP (MD) 15967 / 2020 dated 08.03.2021; (iv) Bhagawathi Construction vs. Union of India - (2022) 06 CCH GST 0359. 9. Per contra, learned AGA as well as the learned counsel for the other respondents, in addition reiterating the various contentions urged in their statement of objections submit that there is no merit in the petitions and the same are liable to be dismissed. 10. I have given my anxious consideration to the rival submissions and perused the material on record. 11. It is an undisputed fact that the Petitioners herein are class-I contractors who have entered into 'works contract' with various State Govt agencies and that the agreements were enter....
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....ST) should be taxed under the provisions of the earlier laws and not GST laws. Hence the portion of the contracts which are already executed earlier to 01.07.2017 must be taxed under the erstwhile Karnataka Value Added Tax Act and the Service Tax Act. This turnover, in addition to the certified works, also must include the turnover related to the uncertified works which are already executed but yet to be certified. Only that portion of the contract which are executed after the implementation of the GST, i.e., after 01.07.2017 are liable to tax under the GST Act. In case where the works contractor has in stock, materials which are purchased before 01.07.2017 and not incorporated into the contract then the contractor has to claim the transitional rebate of the taxes paid under the earlier laws and the amount eligible would be credited to the Input Tax Credit Ledger of the contractor. With regarding to the issue of the impact of change of tax regime is concerned a detailed annexure explaining the methodology of calculation of the impart of change of tax regime along with an illustration is placed in the file. (Annexure A & 13) Further, the tax difference sho....
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....ner has called upon the respondent to release the GST amount. The request of the petitioner was taken note of by the respondent authority which has sought for clarification from the Karnataka Urban Infrastructure Development and Finance Corporation ("KUIDFC", for short) as per their letter dated 06.12.2019. The specific clarification that was sought is as to whether GST is required to be made good to the contractor as it was only 5% of the VAT which was provided for in the contract. 5. The KUIDFC by their communication dated 03.01.2020 has opined as follows: "With reference to the above, your request for clarification on Tax calculation for the pre-GST period and post-GST period in the running bills of works has been examined by the GM (PF), KUIDFC and has suggested the following procedure for calculating Taxes for pre-GST period and post-GST period as follows: 1. Calculate the balance works to be completed in the original contract. 2. Derive the rate of materials, KVAT items required to comp lete the balance works. 3. Deduct the "KVAT" amount from those materials and the service tax also. 4. Add the applicable "GST" on those it....
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.... after adjusting the amounts of sales tax that was provided for in the contract entered into between the petitioner and the respondent. 11. It is further to be noticed that the tax component is an independent component which the petitioner does not retain as a profit and is a statutory payment to be made. Looking into the nature of such payment of GST, the respondent is required to honour the same in terms of the clarification dated 03.01.2020. The consideration by the respondent to be made within a period of not later than twelve weeks from the date of release of the order. 12. Accordingly, the petition is disposed off." 15. So also, in the case of Dhabaleshwar Pattnaik Vs. State of Orrisa, referred to supra, certain directions have been given by the Division bench of the said Court as under: 3. In case of work, where the tender was invited before 01.07.2017 on the basis of SOR-2014, but payments made for balance work or full work after implementation of GST, the following procedure shall be followed to determine the amount payable to the works contractor; (i) Item-wise quantity of work done after 30.06.2017 (i.e. the Balance Work) an its work value a....
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....t factor, profit margin and tax component. There cannot be any contest regarding the cost factor and profit margin. The tax liability will have to borne by the Respondent-Board. The Respondents are directed to reworking terms of the contract and entered into a revised agreement with the Petitioners. The entire exercise shall be concluded within a period of 8 weeks from the date of receipt of copy of this order". 17. Similarly, in Bhagwati Constructions' case supra, the Gujarat High Court held as under:- 25. The issue that arises for our consideration is, whether the respondents are justified in withholding the refund/reimbursement in favour of the writ-applicants. 26. The Government of India through the Ministry of Railways, had issued an order on 27.10.2017 for the GST neutralization of the contracts. The order reads as under "Government of India Ministry Of Railways (Railway Board) New Delhi No. 2017/CE-I/CT/7/GST, dated 27.10.2017 To As per list attached Sub: Impact of GST on Existing Works Contracts 1. Ministry of Railways have received a number of representations from Zonal Railways, railway contractors and c....
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....ered accountant engaged by him. The tax liability of the contractor before implementation of CST should be worked out taking into account all stipulated taxes in force before GST implementation i.e. Excise duty. VAT including VAT on Excise duty. Entry tax, Octroi duty, prevalent Service tax etc., irrespective of whether the same were actually paid by agency or not. 3.5 The rate reasonability and quantities of input materials for which ITC shall be available to the contractor, should be ensured by the executive with due care in consultation with associate finance. 3.6 Sample post checks of the compensation made to the contractor may be got undertaken by the GST consultant engaged by the Zonal Railways/Production Units. 3.7 Recovery, if any, which is required to be done from the contractors, may be regulated as per Section 171(1) of CGST Act 2017. 4. This is issued with the approval of Board (ME, FC, CRB) (Prem Sagar Gupta) Executive Director/Civil Engineering (G)/Railway Board 27. Pursuant to such order, the Western Railways issued a Joint Procedure Order dated 21.1.2018 laying down the procedure for the GST neu....
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....eet for the tax liabilities before GST and after GST, including the list of items for which the to put Tax Credit (ITC) is available for the work. A sample copy of the work sheet is given in the Annexure-B for general guidance. The details given in this worksheet and calculations should be duly certified by Statutory/Tax Auditor auditing books of the contractor. This worksheet shall be submitted for each of the bills, which may have already been passed as per provision of para 15 of this JPO and also for all other bills being processed after the notification of the GST for the contracts falling in the categories in para 1(i) & (iii)and HO GST rates as applicable at the time of actual passing of bills will be adopted. The worksheet shall contain details of the quantities of all input materials/services procured for the particular work/works. The contractor shall also certify that the invoices submitted for the work have not been/will not be used for any other work to claim Input Tax Credit (ITC)/refund. The contractor shall also give a certificate that no refund claims of GST are pending settlement with the GST authorities. At the Railway end, the component of inpu....
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....ulated as per section 171 (1) of CGST Act 2017, i.e., any reduction in the rate of tax on any supply of goods or services or the benefit of the Input Tax Credit shall be passed on to the recipient (Railways) by way of a commensurate reduction in the prices. The executive will review all the agreements to ensure that recovery is done, wherever due. The recovery shall be effected from the on account bills on hand and if no account bills are pending the recovery shall be affected from the final bill/security deposit or any other dues. 28. It is germane to note that paragraph 4 of the JPOs as above provides that the review for the GST neutrality is to be done on case-to-case basis. Further, it is provided in paragraph 8.2 as above of the JPO that a supplementary agreement is to be entered in to by the executive with the contractor for dealing with the impact of the GST in individual contracts Paragraph 8.6 (b) of the JPO provides that the contractor will have to provide a work sheet for the tax liabilities before the GST and after the OST including the list of items for which the input tax credit is available for the work. It is further provided that the worksheet should conta....
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....n made by the learned Senior counsel for the petitioners that the tax component is an independent component which the petitioners do not retain as a profit and is a statutory payment to be made; that looking into the nature of such payment of GST, the respondents/employers are required to honour the same after determining the differential tax burden, especially for the Petitioners who are before this court where "works contract" were entered prior to 01.07.2017 during KVAT regime and works are completed pre-GST but payments are made post-GST or Contracts entered prior to 01.07.2017 but partly executed pre-GST and balance work executed post-GST or Contracts for which tenders were invited during KVAT regime and finalised after 01.07.2017 under GST regime or contracts which were invited during KVAT regime under old schedule of rates (SR) but finalised under GST regime and that a certain procedure is required to be followed to determine the amount payable by or to the works contractors/Petitioners. 19. In view of the aforesaid facts and circumstances and the Circulars dated 03.01.2020 and 14.12.2020, which have been followed by this Court in MAS constructions's case supra, and also ....