TaxTMI 
TaxTMI 
2025 (12) TMI 932
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly) given by the petitioner to respective respondent - employers. (b) Issue a writ or such other order directing the Respondent No. 1 - State Govt, to issue a circular/policy to address the issue of payment of GST on works contract which are executed under VAT regime wherein GST is not paid by the Respondent - Contractors to the GST department. (c) Pass such other orders as may be deemed appropriate under the circumstances of the case, in the ends of justice." 2. Heard Shri D.R. Ravishankar, learned Senior counsel for Shri Naveen G.S., learned counsel appearing for the petitioner; Shri M. Rajakumar, learned Additional Government Advocate appearing for respondent No. 1 and Shri Dakshina Murthy, learned counsel appearing for respondent No. 6. 3. The issue in the lis is with regard to refund of GST. The controversy is, what schedule of rates is made applicable in the contracts entered into between the petitioner and the statutory departments. 4. The learned Senior counsel appearing for the petitioner submits that the contracts though were entered into at a later point in time i.e., after the regime of the GST, they were at the old scheduled rates under the K....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted by the Consultants M/s.S.R.& M.R. Associated, Chartered Accountants to KUIDFC on goods & service tax matters is enclosed herewith for your reference and further action in the matter." 13. Subsequently, the State Government issued one more Circular dated 14.12.2020, which reads as under :- No: ED/212/FC2/2020 Finance Department (PC-2) KWB/CAO/AS2/AMRUT/GST/2020-21 Dated: 14.12.2020 The proposal of the Administrative Department has been examined. Finance Department opines as follows: "Karnataka Urban Water Supply & Sewerage Board, Bangalore has sought clarification on GST calculation for works contract wherein agreements were executed prior to 01.07.2017 at old schedule rate., Generally the turnover related to the supply of goods or services or both effected before 01.07.2017 (appointed date of implementation of GST) 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, al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fter coming into force of the Goods and Services Act ("the GST Act", for short). 3. The petitioner submits that necessary payment at the petitioner's end of the applicable GST being statutory requirement has been made and the details of the payment are as per the table mentioned in Para 11 of the petition, which reads as under: Particulars Period Balance GST not paid to petitioner Renovation of Swimming pool and operation From 14/7/2019 to 30/11/2019 Rs. 15,42,727 Rehabilitation of MG Park From 31/07/2019 to 04/08/2020 Rs. 26,58,856 Total Rs. 42,01,582 4. The petitioner submits that after having paid the applicable GST, the petitioner has made representations on 01.08.2019 vide Annexure-'F' and 27.02.2020 vide Annexure-'H', whereby the petitioner 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 wheth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of tax paid in the pre-GST regime as well as taxes as applicable relating to all taxes in post-GST regime has been taken note of. The methodology and impact of change of tax has also been referred to. This stand has been approved by the Additional Chief Secretary to Government, Finance Department. This clarification made in the context of an authority set up under a statute and taking note of the clarification made by the KUIDFC, the respondent is required to act in terms of the clarification made 10. Further, insofar as tax component is concerned, as the contracts were entered after coming into force of the GST Act, and in light of the opinion expressed by a clarification made on 03.01.2020, the respondent is required to make good the GST 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 clarificat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the excess amount. (viii) In case the revised GST-inclusive work value for the Balance Work is less than the original agreement work value for the Balance Work, the payment the works contractor is to be reduced accordingly. In case excess payment has already been made to the works contractor in pursuance of the origin agreement, the excess amount paid must be recovered from the works contractor. (ix) These procedures shall be applicable to all works contract including those executed in EPC/Turn-key/Lumpsum mode. 16. So also, in the case of Subaya Construction's case supra, the Madras High Court held as under:- "When the Petitioners entered into an agreement with the Respondent-Board, the contract price comprise three components viz., cost 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 orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....agreement to state that in case there is any further change in the GST tax structure till the date of completion of work or any error is noticed in the calculation of amount payable/recoverable till the release of Final Bill amount to contractor, the same shall be paid by the Railwaysor recovered from the contractor's bills/security deposit or any other dues of contractor with the Govt of India. 3.3 In case while awarding the contracts, the reasonability of rates was justified by Tender Committee considering the impact of CST, such compensation would not apply. 3.4 For neutralizirig GST impact on the works contracts awarded before implementation of GST along with documentary evidence. the contractor should submit work sheet of tax liability before GST and after GST duly certified by chartered 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T should be worked out taking into account all stipulated taxes in force prior to the implementation of GST i.e., excise duty, VAT, including VAT on excise duty, entry tax, octroi duty, prevalent service tax etc, irrespective of whether the same were paid by the agency or not for the On Account/FCC Bills. 8.6 On receipt of the Account/Final contract certificate from the executive, the contractor shall submit the following documents (for the on Account/FCC to the Executive for the GST neutralization. a. The invoice (Bill) duly segregating the GST 'component from the gross amount of the work executed. This should contain details of GSTIN TIN & STRN numbers-state-wise (if he is working is more than one State along with the worksheet. b. A work sheet 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 b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actor before and after implementation of the GST, submitted by the contractor, shall be recorded in the Measurement Book clearly showing-- Tax liability before GST = Rs........... Tax liability after GST = Rs.............. Difference (+)/(-)= Rs............... The bill containing these details shall then be prepared as per the format given in Annexure-B and forwarded to Finance for security and prior vetting The contractors claim will then be admitted to the for passing of the Bill The difference in the tax liability before the GST and alter the GST and after the GST shall be reimbursed to the contractor or recovered from the contractor as the case may be. 11. Recovery, if any, from the contractors may be regulated in the rate of tax on any supply of goods or services or the as per section 171 (1) of CGST Act 2017, i.e., any reduction 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 shall be effected from the on account bills on hand and if no ensure that recovery is done, wherever. due. The recovery account bil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The parties to the agreement have clearly agreed to the GST neutralities in respect of such contract. Moreover, the writ-applicants have produced a certificate of the Chartered Accountant certifying that no GST-paid inputs have been used in the execution of the contract and, therefore, there was no input tax credit pertaining to this contract. Such facts are not in dispute. It that be so, then the writ-applicants are entitled to refund in terms of the order for the GST neutralization, issued by the Ministry of Railways read with the JPO and the supplementary agreement. In fact, it appears that this was also determined by the respondents themselves by generating a pay order in favour of the writ-applicants. 18. I find considerable force in the submission 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 contra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct value, concerned department/authority has to decide whether agreement needs to be changed or not. (j) A supplementary agreement may be signed with the Petitioners for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioners are to be paid /reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioners. (iii) Petitioners are directed to submit comprehensive representations to the respective employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST. (iv) If such representations are submitted, the respective employers/Respondents are directed to cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....04.2023 vide Annexure-E. iii) The respondent/Department shall reimburse the said amount within a period of six weeks from the date of receipt of copy of this order." What is discernible from paragraph 18 of the said order and the operative portion is that whether contracts that were entered into prior to the GST regime and the work is completed post GST regime, but payments are made post GST or contracts entered into prior to 01.07.2017, but partly executed and balance work executed post GST and all other incidental issues have been decided. The decision is direction for payment of refund of GST, without any verification. 8. The co-ordinate bench has passed plethora of directions. The directions of which would completely cover the issue that is projected in the case at hand, notwithstanding the vehement opposition of the respondents, as the respondents are only directed to consider the representations in the teeth of the observations made in the order, and liberty is also reserved in favour of the petitioners to challenge the order, if any, that would be passed and if it is against the petitioners, that would make it clear that there is a direction to consider the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the "KVAT" amount from those materials and the service tax, if applicable. (f) Add the applicable "GST" on those items. (g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT. (h) Further, the "tax difference" should be calculated on such balance works executed or to be executed after 01.07.2017 separately. (i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not. (j) A supplementary agreement may be signed with the petitioner for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioners are to be paid/reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as....