2020 (11) TMI 918 - HC - GST

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 - grievance of the petitioner is that in view of the introduction of the GST, petitioner is required to pay tax which was not envisaged while entering into the agreement - HELD THAT - The Government has now come out with a revised guidelines in this respect in supersession of the guidelines issued vide Finance Department letter dated 07.12.2017. Additional Counter Affidavit of O.P.-authority has been filed in similar cases annexing the revised guidelines relating to works contract under GST issued by the Government of Odisha, Finance Department vide Office memorandum No. FIN-CTI-TAX- 0045-2017/38535/F Dated 10.12.2018. 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 21.01.2021 - 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. No coercive action shall be taken against the petitioner till 21.01.2021 - Petition disposed off.

Summary

Issues:
1. Challenge to the action of opposite parties for not reimbursing differential tax amount post change from VAT to GST.
2. Difficulty faced by contractors due to change in tax regime regarding works contract under GST.

Analysis:
1. The petitioner challenged the opposite parties for not reimbursing the differential tax amount resulting from the transition from Value Added Tax (VAT) to Goods and Service Tax (GST) effective from 01.07.2017. The main contention was that the contractors faced difficulties due to the change in the tax regime under GST, leading to unexpected tax liabilities not considered during the agreement. The government issued revised guidelines superseding the previous guidelines to address such issues. The revised guidelines detailed the treatment of works contract under GST, specifying the taxable rates and procedures for determining the GST-inclusive work value for contracts executed before the GST implementation but partially or fully executed post-GST. The revised guidelines also outlined the process for reimbursement or reduction of payment based on the revised GST-inclusive work value compared to the original agreement value.

2. The main issue revolved around the challenges faced by contractors post the transition to GST regarding works contracts. The grievance highlighted was the additional tax burden imposed on contractors due to the introduction of GST, which was not anticipated at the time of entering into agreements. The government's revised guidelines aimed to provide a structured approach to address these challenges by specifying the treatment of works contracts under GST, determining taxable values, and outlining procedures for adjusting payments based on revised work values post-GST implementation. The judgment directed the petitioner to submit a comprehensive representation to the appropriate authority within a specified timeline to address the grievance in line with the revised guidelines. It also allowed for challenging the authority's decision if aggrieved, with a stay on coercive actions against the petitioner until a specified date.