2021 (1) TMI 299 - HC - GST

Reimbursement of differential tax due to change of regime from VAT to GST - difficulty faced by the contractors due to change in the regime regarding works contract under GST - 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. He has filed Additional Counter Affidavit of O.P.-authority 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-CTITAX- 0045-2017/38535/F Dated 10.12.2018. The petitioner shall make a comprehensive representation before the appropriate authority within two 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 revised guidelines dated 10.12.2018 issued by the Finance Department, Government of Odisha, as expeditiously as possible, preferably by 15.03.2021 - petition disposed off.

Summary

Issues:
Challenge to non-reimbursement of differential tax amount post transition from VAT to GST in works contract under GST regime.

Analysis:
The petitioner challenged the failure of the opposite parties to reimburse 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 main issue highlighted was the difficulty faced by contractors due to the change in the regime concerning works contract under GST. The petitioner contended that the introduction of GST necessitated the payment of taxes that were not initially anticipated when entering into agreements. The Government responded by issuing revised guidelines superseding the previous ones, addressing the concerns raised by contractors regarding additional GST amounts for works tendered before 01.07.2017 but executed partly or wholly after the GST implementation date.

The revised guidelines clarified that works contracts under GST are treated as composite supplies taxable at rates of 18%, 12%, or 5% based on the nature of the contract. The Schedule of Rates 2014 (SoR-2014) was revised to exclude taxes like Excise Duty, VAT, Entry Tax, and Service Tax, necessitating the determination of GST-exclusive work value for estimates post 01.07.2017. Contractors were required to raise tax invoices separately showing taxable work value and GST components. Specific procedures were outlined for works where tenders were invited before GST implementation but payments were made post-GST, ensuring fair determination of payable amounts to contractors based on original agreements and revised estimates.

The guidelines also addressed scenarios where the revised GST-inclusive work value for balance work exceeded or fell short of the original agreement value, stipulating reimbursement or deduction accordingly. Additionally, procedures were outlined for F2 contracts, emphasizing the application of premium/discount offered by contractors on respective items to determine taxable values under GST. Administrative departments were instructed to implement the revised guidelines for all works contracts, including those executed in EPC/Turn-key/Lumpsum mode.

The Court directed the petitioner to submit a comprehensive representation to the appropriate authority within two weeks, following which the authority would consider and dispose of the grievance in line with the revised guidelines by 15.03.2021. 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, allowing parties to access the order digitally due to pandemic restrictions, ensuring compliance with court procedures.