2022 (7) TMI 185 - HC - GST

Rate of GST - execution of certain works contract in favour of one Nirmithi Kendra, Bengaluru Rural District, for which it has received consideration - case of the petitioner is that the Nirmithi Kendra is a Government concern and hence petitioner is liable to pay GST at the rate of 12% on the consideration received - taxable at 12% or 18%? - HELD THAT - Admittedly, Annexure C is an audit report issued under Section 65 (6) of the CGST Act. Section 65 of the CGST Act, 2017 deals with Audit by tax authorities - no recovery is contemplated by the authorities. Upon issuance of an audit report under Section 65 (6) of the CGST Act, it requires further adjudication before holding the petitioner liable for the same, which will be done only after hearing the petitioner. Similarly, Annexure G is an intimation to tax assessee as payable under Section 73 of the CGST Act and the said intimation itself permits the petitioner to show cause its case before the authority and further action will be initiated only after considering the reply of the petitioner if any. Hence, the writ petition filed by the petitioner has to be considered premature. However, taking into consideration that the petitioner was required to submit its reply to Annexure G by 23.05.2022, the same is hereby extended to 8.07.2022. Petition dismissed.

Summary

Issues:
1. Discrepancy in GST rate calculation for works contract executed for a government concern.
2. Validity of audit report and tax ascertained payable under CGST Act.
3. Prematurity of the writ petition filed by the petitioner.

Analysis:
1. The petitioner, a registered dealer under the CGST Act, executed works contract for a government concern and believed it was liable to pay GST at 12%. However, the respondent authority audited the petitioner and demanded 18% GST. The petitioner sought quashing of the audit report and tax demand, contending that as the concern was a government entity, only 12% GST was applicable.

2. The audit report issued under Section 65(6) of the CGST Act was found to be a preliminary step, not initiating recovery proceedings. The respondent clarified that the audit report and tax demand were subject to further adjudication, with the petitioner having the opportunity to present reasons before a final decision on tax liability. The court noted that no recovery was contemplated immediately after the audit report, as per the provisions of Section 65(6) of the CGST Act.

3. The court observed that the intimation of tax ascertained payable under Section 73 of the CGST Act allowed the petitioner to show cause before any further action was taken. As the petitioner was required to respond by a specific date, the court extended the deadline to allow the petitioner ample time to present its case. Despite the premature nature of the writ petition, the court dismissed it, granting the petitioner an extended period to submit its reply.

In conclusion, the court found that the audit report and tax demand were part of a process that required further adjudication and consideration of the petitioner's submissions. The court extended the deadline for the petitioner to respond, emphasizing the importance of allowing the petitioner a fair opportunity to present its case before any final decision on tax liability was made.