2019 (7) TMI 1380 - HC - GST

Works contract - pre and post GST implementation situation - Scope of tender / contract between parties - Standard Bidding Document (SBD) applicable in the Works Departments of the Government of Bihar - Model Bidding Document (MBD) - such contracts in which the estimates were prepared and agreement were executed prior to 01.07.2017 i.e. the date of commencement of GST Act, but the work continued even after that - HELD THAT - This court finds that initially when the writ application was filed the petitioner(s) had been complaining that they were being burdened to pay the GST in respect of the works allotted to them on the basis of the SOR which did not take care of the implication of the GST . The rate of GST or any other issue were not in question and learned counsel for the petitioners has reiterated before this court that his grievance is limited to payability of the differential amount, if any, arising out of and by virtue of implementation of the GST . It has been shown that the grievance of the petitioners had in fact been redressed, learned counsel for the petitioners has agreed at the bar that if Clause (vii) of the minutes of the meeting of the Rural Works Department is followed by all other works department of the Government of Bihar, the grievance of the petitioners shall be taken to have been redressed. This court is of the considered opinion that now nothing remains for adjudication by this court as the grievance of the petitioners as framed in these writ applications are to be taken to have been redressed - application disposed off.

Summary

Issues Involved:
1. Effect of the GST Act, 2017 on tenders floated prior to its implementation.
2. Requirement to amend Clause 35 of the Standard Bidding Document (SBD) and Model Bidding Document (MBD) for GST compliance.
3. Mechanism for reimbursement of GST paid by contractors.
4. Impact of GST on contractor's profit.
5. Implementation of GST guidelines by the State Government.
6. Maintenance of books and submission of information by contractors as per Clause 35.
7. State Government's response and actions taken regarding GST implementation.

Detailed Analysis:

1. Effect of the GST Act, 2017 on tenders floated prior to its implementation:
The petitioners contended that they participated in tenders before the GST Act, 2017 came into force, under the Bihar VAT Act, 2005. They argued that post-GST implementation, the Works Department of the Government of Bihar should have amended Clause 35 of the SBD to include provisions for GST reimbursement. The absence of such amendments resulted in the petitioners being liable to pay GST without reimbursement provisions.

2. Requirement to amend Clause 35 of the Standard Bidding Document (SBD) and Model Bidding Document (MBD) for GST compliance:
Clause 35 of the SBD, prevailing on 01.07.2017, stated that all tendered rates include all taxes and levies. If any new tax is imposed after the tender receipt date, the contractor should be reimbursed, provided the payment is not due to the contractor's delay. The petitioners argued that Clause 35 needed amendment to address GST's impact, as it was not initially designed to cover GST.

3. Mechanism for reimbursement of GST paid by contractors:
The petitioners highlighted the lack of a mechanism to determine the GST amount payable on ongoing contracts, who would deduct and deposit the GST, and how it would be refunded to contractors. They were required to deposit 12% GST on each bill without clarity on reimbursement.

4. Impact of GST on contractor's profit:
The petitioners argued that the imposition of GST affected their profit margins. They were approved a 10% profit on the net estimate value, but GST required them to deposit 12%, which was not contemplated under the Bihar VAT Act, 2005.

5. Implementation of GST guidelines by the State Government:
The Water Resources Department had formulated a modus operandi for GST in works contracts, but the Commercial Taxes Department had not concurred. The petitioners sought a directive to delete Clause 35 and incorporate GST reimbursement provisions. They also requested a refund of GST paid from running account bills and a revision of the SOR to be GST compliant.

6. Maintenance of books and submission of information by contractors as per Clause 35:
The Executive Engineer's counter affidavit stated that the petitioner did not provide information regarding extra tax paid within 30 days of imposition, as required by Clause 35(ii) & (iii). The Engineer-in-Chief's letter dated 29.01.2019 indicated that the SOR had been revised to consider GST implications.

7. State Government's response and actions taken regarding GST implementation:
The State's counter affidavit referenced guidelines from the National Rural Infrastructure Development Agency (NRIDA) on GST implementation. The guidelines categorized projects into four categories (A, B, C, D) based on their status relative to GST implementation and provided detailed steps for calculating additional tax burdens and revising contract values. The State also issued notifications and revised the SOR to align with GST requirements.

Conclusion:
The court found that the petitioners' grievances had been addressed through the revised SOR and guidelines for GST implementation. The petitioners agreed that if all works departments followed the Rural Works Department's decision, their issues would be resolved. Consequently, the court disposed of the writ applications, noting that the petitioners' grievances had been redressed.