2022 (10) TMI 1240 - HC - GST

Implementation of GST regime on subsisting works contract - Reimbursement of GST paid on differential rate of taxes - Standard Operating Procedure (SOP) or directive framed for post GST payment on pending bills related to the works orders issued during the pre-GST regime - HELD THAT - It was at the instance of this Court that the State Government thought it proper to lay down a mechanism through Standard Operating Procedure to deal with the individual cases of aggrieved persons / petitioners regarding reimbursement of differential amount of GST paid by them under the subsisting contract as on 01.07.2017. Now that the SOP has been framed and published in the Extraordinary Gazette dated 26.08.2022 (AnnexureB to the supplementary counter affidavit of the Respondent Commercial Taxes Department dated 02.09.2022 filed in W.P.(T) No. 2108 of 2019) and that the grievances of the petitioners are still at the level of individual department or State Instrumentalities this Court is not required to make any comments on the terms and clauses of the SOP at this stage. Petitioners should press their claim before the concerned departments or State Instrumentalities or make a fresh claim so that the competent authorities under the Respondents can take an informed decision on the claim of the individual petitioners in accordance with law and the SOP framed vide Notification dated 26.08.2022 within a time frame. Needless to say if pursuant to the said decision any individual petitioner or person feels aggrieved it may give rise to a fresh cause of action to be raised in an appropriate proceeding. It would also be open for the petitioners to lay a challenge to any of the clause of SOP if so aggrieved thereby. Since the claim of the petitioners have been pending for quite long on the implementation of GST regime since 01.07.2017 it would be in the fitness of things that the representation or claim of the individual petitioners be decided in an expeditious manner preferably within a period of 8 weeks from the date of receipt of a copy of this order. Let W.P (T) be de-tagged from the instant batch of writ petitions and be listed separately after one week. Rest of the writ petitions are disposed of.

Summary

Issues Involved:
1. Implementation of GST regime on subsisting works contracts.
2. Reimbursement of differential tax burden due to GST.
3. Lack of uniform guidelines by the State of Jharkhand.
4. Necessity of a Standard Operating Procedure (SOP) for GST implementation on works contracts.

Detailed Analysis:

1. Implementation of GST Regime on Subsisting Works Contracts:
The petitioners argued that the GST regime, effective from 1st July 2017, introduced a higher rate of tax, which they were forced to bear without an appropriate mechanism laid down by the State to ensure proper implementation on ongoing works contracts. Under the VAT regime, the contracts contained clauses for tax computation, but the GST regime increased the tax rate and levied it on the taxable value of the works contract as a whole. This led to a significant financial burden on the petitioners, as they were compelled to pay the differential tax without proper reimbursement.

2. Reimbursement of Differential Tax Burden Due to GST:
The petitioners contended that no uniform guidelines had been framed by the State of Jharkhand for reimbursement of the differential tax burden. They highlighted that other State Governments, such as Telangana and Andhra Pradesh, and various High Courts, including Madras and Orissa, had laid down guidelines to address this issue. The petitioners sought similar guidelines from the State of Jharkhand to alleviate their financial burden.

3. Lack of Uniform Guidelines by the State of Jharkhand:
The court noted that the State of Jharkhand had not framed uniform guidelines for the implementation of GST on ongoing works contracts. This lack of coordination among different departments was identified as a significant issue. The court had previously directed the State to address this issue, but the decision taken by the Water Resources Department on 22nd April 2019 failed to address the matter adequately.

4. Necessity of a Standard Operating Procedure (SOP) for GST Implementation on Works Contracts:
The court emphasized the need for a Standard Operating Procedure (SOP) to ensure uniform implementation of GST guidelines across different departments. The Chief Secretary of Jharkhand was directed to look into the matter and ensure that proper guidelines were laid down in a time-bound manner. The Chief Secretary held meetings and workshops with the concerned departments, resulting in the framing of an SOP, which was notified on 26th August 2022.

Conclusion:
The court concluded that the SOP framed by the State Government should be implemented to address the grievances of the petitioners. The petitioners were directed to approach the competent authorities under the Respondent Department regarding their claims for reimbursement of GST paid on differential rates. The court did not make any comments on the clauses of the SOP at this stage, allowing the petitioners to challenge any adverse terms if necessary. The court emphasized the need for expeditious resolution of the petitioners' claims, directing the concerned authorities to decide within eight weeks from the receipt of the court's order.

Separate Judgments:
The court ordered that W.P (T) Nos. 989/2022 and 990/2022 be de-tagged and listed separately after one week. The rest of the writ petitions were disposed of, with no comments on the individual cases of the petitioners. All pending I.A.s were closed.