2018 (12) TMI 1889 - HC - GST

Non-reimbursement of differential tax amount - difficulty faced by the contractors due to change in the regime regarding works contract under GST - HELD THAT - The petitioner shall make a comprehensive representation before the appropriate authority within four weeks from today ventilating the grievance. If such a representation is filed, the authority will consider and dispose of the same, in the light of the aforesaid revised guidelines dated 10.12.2018 issued by the Finance Department, Government of Odisha, as expeditiously as possible, preferably by 31.03.2019. No coercive action shall be taken against the petitioner till 31.03.2019 - The writ petition is disposed of accordingly.

Summary

Issues:
Challenge to non-reimbursement of differential tax amount due to change from VAT to GST; Quashing of Clause 1(iii) of Finance Department Memorandum dated 07.12.2017.

Analysis:
The main issue in this case pertains to the challenges faced by contractors due to the transition from Value Added Tax (VAT) to Goods and Service Tax (GST) regime. The petitioner contested the failure of the opposite parties to reimburse the differential tax amount resulting from this change and sought to invalidate Clause 1(iii) of the Finance Department Memorandum dated 07.12.2017. The crux of the matter lies in the unexpected tax burden imposed on the petitioner post-GST implementation, impacting the contractual agreements entered into prior to the tax regime shift.

The Additional Counter Affidavit filed by the learned Addl. Government Advocate introduced revised guidelines superseding those issued on 07.12.2017. The revised guidelines, dated 10.12.2018, addressed concerns related to works contract under GST. The guidelines emphasized the treatment of works contract as a composite supply of service under GST, taxable at rates of 18%, 12%, or 5% depending on the nature of the contract. Notably, the revised Schedule of Rates (SoR-2014) excluded taxes like Excise Duty, VAT, Entry Tax, and Service Tax, necessitating the determination of GST-exclusive work value for estimates post-01.07.2017.

Regarding works contracts initiated pre-GST but executed post-GST, specific procedures were outlined to ascertain the payable amount to contractors. These procedures included determining revised work values, calculating applicable GST rates, and adjusting payments based on the revised GST-inclusive work values. The guidelines also mandated the signing of supplementary agreements for revised values and outlined reimbursement or reduction protocols based on the revised amounts. Furthermore, the guidelines extended applicability to all works contracts, including those in EPC/Turn-key/Lumpsum mode, and provided instructions for F2 contracts.

The judgment directed the petitioner to submit a comprehensive representation to the appropriate authority within four weeks, following which the authority would review and resolve the grievance in line with the revised guidelines by 31.03.2019. The petitioner was granted the right to challenge the authority's decision if aggrieved, with a stay on coercive actions against the petitioner until the specified date. The writ petition was disposed of accordingly, with connected Miscellaneous Cases also resolved.