2018 (12) TMI 1953 - HC - GST

Works Contract - Non-reimbursement of differential tax amount arising out of change in tax regime from Value Added Tax (VAT) to Goods and Service Tax (GST) with effect from 01.07.2017 - 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. If the petitioner(s) will be aggrieved by the decision of the authority, it will be open for the petitioner(s) to challenge the same. Writ petition disposed off.

Summary

Issues:
Challenge to non-reimbursement of differential tax amount due to change from VAT to GST, Quashing of Finance Department Memorandum.

Analysis:
The main issue in this writ petition is the challenge against the opposite parties for not reimbursing the differential tax amount resulting from the shift in tax regime from Value Added Tax (VAT) to Goods and Service Tax (GST) effective from 01.07.2017. The petitioner also seeks to quash Clause 1(iii) of the Finance Department Memorandum dated 07.12.2017. The crux of the matter lies in the difficulty faced by contractors due to the change in the regime concerning works contract under GST. The grievance highlighted is that the petitioner is now required to pay tax that was not initially foreseen when entering into the agreement.

The Government, through Mr. M.S. Sahoo, learned Addl. Government Advocate, has introduced revised guidelines superseding the previous ones issued on 07.12.2017. These revised guidelines, issued on 10.12.2018 by the Government of Odisha, Finance Department, address the concerns related to works contract under GST. The guidelines emphasize the treatment of works contract as a composite supply of service under GST, taxable at varying rates. The revised guidelines necessitate the exclusion of taxes like Excise Duty, VAT, Entry Tax, and Service Tax from the revised Schedule of Rates to comply with GST provisions. Contractors are now required to raise Tax Invoices reflecting the taxable work value and GST separately under the GST regime.

Regarding works contracts where tenders were invited before 01.07.2017 but payments were made post-GST implementation, specific procedures have been outlined. These procedures include determining the revised estimated work value, calculating GST-inclusive work value, and signing supplementary agreements with contractors for any adjustments in payment. The guidelines also cover scenarios where the revised GST-inclusive work value exceeds or falls short of the original agreement value, providing directions for reimbursement or reduction of payments accordingly. These procedures are applicable to all works contracts, including those executed in EPC/Turn-key/Lumpsum mode.

The judgment instructs the petitioner to submit a comprehensive representation to the appropriate authority within four weeks, outlining the grievance. The authority is mandated to consider and dispose of the representation in line with the revised guidelines by 31.03.2019. If dissatisfied with the authority's decision, the petitioner retains the right to challenge it. The judgment ensures that no coercive action will be taken against the petitioner until 31.03.2019, thereby providing a safeguard during the resolution process. The writ petition is consequently disposed of, along with any connected miscellaneous cases.