2023 (10) TMI 986 - HC - GST

Payment of liability of GST incurred on works contract executed and completed after 1st July, 2017 - contracts were awarded in the pre-GST regime or post-GST regime - HELD THAT - It appears the respondent authorities concerned have to bear the additional tax liability for execution of subsisting Government contract either awarded to the petitioners during pre-GST regime or in post-GST regime without updating the Schedule of Rates (SOR) incorporating the applicable GST while preparing Bill for payment. This writ petition is disposed of by giving liberty to the petitioners to file appropriate representations stating all the facts and provision as referred in preceding paragraph of this judgment, before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks from date. On receipt of such representations the Additional Chief Secretary, Finance Department shall take a final decision within four months from the date of receipt of such representations after consulting with all other relevant departments concerned.

Summary

Issues involved:
The issues involved in this judgment include liability of GST on works contract executed before and after 1st July, 2017, challenge to show cause notice under Section 73 of the Central Goods and Services Tax Act, 2017, and West Bengal Goods and Services Tax Act, 2017, regarding payment of tax and interest for the financial year 2017-2018.

Issue 1: Liability of GST on works contract

The petitioners filed a writ petition seeking direction on the respondent authorities to pay the GST liability incurred on works contracts executed before and after 1st July, 2017. The contracts were awarded in both pre-GST and post-GST regimes, making it challenging to include the GST component in the contract value. The petitioners challenged the show cause notice issued under Section 73 of the GST Act for the financial year 2017-2018.

Issue 2: Petitioners' Contentions

The petitioners, a registered partnership firm under the Indian Partnership Act, 1932, received work orders during the period 2017-2018 to undertake constructions. They contended that the estimation and tendering processes began in the pre-GST regime, with work orders issued and work commenced in both pre-GST and post-GST periods. Payment certificates were received without GST tax payment as per the notification and statute.

Issue 3: Respondent's Notice

The respondent authorities issued a notice under Section 73(5) of the GST Act, indicating a mismatch in turnover declared in GSTR-1 and payments received. The petitioners were asked to pay tax, interest, and total amount for the financial year 2017-2018. In response, the petitioners submitted a reply clarifying all points and requested no coercive action until disposal of their submission.

Issue 4: Representation to Government Contractee

Upon receiving the show cause notice, the petitioners promptly requested the Government contractee to pay the GST tax with applicable interest, highlighting that suppliers are entitled to receive GST tax on works contract services executed during the GST regime. The petitioners emphasized the importance of complying with GST rates as per the notification issued by the Finance Department.

Issue 5: Judicial References

The petitioners' advocate cited various court decisions to support the contention that the Government contractee is liable to pay tax and interest. The advocate prayed for a similar order to be passed by the court, ensuring the petitioners are not penalized for the inaction of the Government authorities.

Issue 6: Respondent's Submission

The respondent's advocate argued that the petitioners are responsible for collecting and paying tax under the GST Act. The advocate stated that the writ petition lacked merit and should be dismissed, suggesting a similar order as previously passed by the court for the interest of justice.

Issue 7: Court's Decision

After hearing the submissions and reviewing the case details, the court concluded that the respondent authorities must bear the additional tax liability for government contracts executed without updating the Schedule of Rates to incorporate applicable GST. The court allowed the petitioners to file representations before the Additional Chief Secretary, Finance Department, Government of West Bengal, within four weeks. The Additional Chief Secretary was directed to make a final decision within four months after considering all relevant departments.

Conclusion:

The court disposed of the writ petition, providing liberty to the petitioners to file representations and directing no coercive action against them until a final decision is made. The Additional Chief Secretary was instructed to act in accordance with the law and pass a reasoned order after considering all relevant judgments. The writ petition was thus concluded with no order as to costs, and parties were directed to act based on the court's official order.