2022 (10) TMI 410 - HC - GST

Liability to commercial taxes post the onset of Goods and Services tax, with effect from 01.07.2017 - HELD THAT - The turnover from contract was liable to VAT at the rate of @ 2% prior to 01.07.2017 and 12% post 01.07.2017 under the Goods and Services enactment. It is the petitioners case that the difference in tax liability must be met by the respective purchasers as per the government orders - it is to be noted that the aforesaid Government orders are being applied consistently in the computation of liability in cases of contracts entered into prior to 01.07.2017. Admittedly, been no challenge to the aforesaid Government orders and in such circumstances, the same are liable to be applied to the instant transactions/contract without demur - Upon determination of the liability by the petitioner and the respondents conjointly and as above, any recovery affected from the petitioner contrary to the methodology set out under the aforesaid G.O.'s shall be refunded to the petitioner. The Writ Petitions are allowed.

Summary

Issues:
Liability to commercial taxes post Goods and Services Tax (GST) implementation.

Analysis:
The petitioner, a contractor for National Highways and Public Works Department in Tamil Nadu, raised concerns regarding the liability to commercial taxes following the introduction of GST on 01.07.2017. The contracts in question were entered into before this date. The Finance Department issued Government Orders (G.O.Ms.No.264 and G.O.Ms.No.296) to facilitate the transition from Value Added Tax (VAT) to GST, outlining the methodology for computing GST liability on pre-GST contracts. The petitioner argued that any difference in tax liability should be borne by the purchasers, i.e., the Highways and Public Works departments.

The Government Orders specified that the turnover from contracts was subject to VAT at 2% before 01.07.2017 and 12% post-GST implementation. The court acknowledged the clarity provided by the Government Orders regarding the computation of GST liability for pre-GST contracts. It was emphasized that the methodology outlined in the Orders should be consistently applied, as reiterated in previous court orders.

The court noted that there had been no challenge to the Government Orders, and therefore, they must be applied to the instant transactions without objection. The Orders directed suppliers to collect GST from purchasers at revised rates and remit the same to the government. The methodology for estimating subsumed tax in the contracted value of work was detailed in the Orders to ensure transparency in tax computation.

In light of the above, the court quashed the orders rejecting the petitioner's request to apply the computational methodology of the Government Orders. A mandamus was issued for the petitioner to appear before the Highways and Public Works departments for the computation of tax liability in accordance with the Orders. Any recovery made from the petitioner contrary to the prescribed methodology was directed to be refunded after joint determination of liability by the petitioner and the respondents.

Ultimately, the writ petitions were allowed as per the terms specified, with no costs incurred. Connected miscellaneous petitions were closed accordingly.