2025 (3) TMI 52 - HC - GST

Can a person who enters into a contract with the Government or its agencies that contains a specific clause that the rate quoted shall be inclusive of GST other taxes turn around and claim that he is entitled to Goods Services Tax (GST) over and above the rate quoted by him? - HELD THAT - A reading of the letters/instructions referred to in the writ petitions clearly show that those Circulars/letters/instructions do not apply in a case where the Notice Inviting Tender or the agreement executed between the contractor and the tendering agency clearly specified that the rates quoted shall be deemed to be inclusive of GST. Though certain portions of the letter dated 07.05.2024 and the illustrations given therein at first blush appear to support the case of the petitioner on closer scrutiny it must be held that even those instructions do not support the case of the petitioner. The Circulars/instructions referred to above deal with the preparation of estimate and not with the final tendering process. It clarifies that while preparing estimates for the purpose of administrative/financial sanction the estimates must be prepared without including GST element. The submission of the learned Government Pleader that if the contention of the petitioner were to be accepted the sanctity of the tendering process itself will be affected is only to be accepted. This can be illustrated by means of an example. When the tender document/agreement contemplated that the rates quoted shall be deemed to be inclusive of GST and the successful bidder quotes Rs. 100/- for a particular item of work he cannot be permitted to thereafter turn around and claim that he must be given Rs. 100/- plus 18% GST (total of Rs. 118) as there may have been situations where another bidder after noticing the conditions in the tender document would have quoted Rs. 105/- inclusive of GST and would not have become successful on account of the fact that the successful bidder has quoted only Rs. 100/-. In such a situation if the successful bidder is allowed to claim 18% GST over and above the rate of Rs. 100/- quoted by him the Government/its agencies would end up paying Rs. 118/- which obviously cannot be accepted. Conclusion - The contractor was not entitled to claim GST over and above the quoted rates specified in the contract agreements. There are no merit in these writ petitions and they are dismissed in limine.

Summary

The issues presented and considered in this legal judgment are whether a contractor who enters into an agreement with the Government specifying that the quoted rate is inclusive of GST can subsequently claim entitlement to Goods & Services Tax (GST) over and above the quoted rate. The key legal question is whether the contractor is entitled to claim GST in addition to the amount quoted in the contract.The detailed analysis of the issues is as follows:1. Relevant legal framework and precedents:The contractor, a partnership firm engaged in construction projects, entered into agreements with the Kerala Road Fund Board. The agreements specified that the rates quoted by the contractor would be inclusive of GST and other taxes. The petitioner argued that circulars and instructions issued by the Government indicated their entitlement to claim GST over and above the quoted amount.2. Court's interpretation and reasoning:The Court analyzed the contract agreements and the circulars referred to by both parties. The Court noted that the agreements clearly stated that the quoted rates were inclusive of GST. The Court emphasized that the terms of the contract were unambiguous, and there was no need for contra proferentem construction. The Court rejected the petitioner's claim that they were entitled to GST over and above the quoted amount based on the circulars and letters issued by the Government.3. Key evidence and findings:The Court examined the circulars, letters, and instructions cited by the petitioner and the Government. The Court found that the circulars did not apply to situations where the contract explicitly stated that the quoted rates included GST. The Court highlighted that the circulars addressed different scenarios related to the transition from the VAT regime to the GST regime.4. Application of law to facts:The Court applied the principle of interpreting contracts based on their clear terms. It concluded that the contractor could not claim GST over and above the quoted rates when the contract clearly stated otherwise. The Court emphasized the importance of upholding the integrity of the tendering process and ensuring that contractors abide by the terms agreed upon in the contract.5. Treatment of competing arguments:The petitioner argued that the circulars supported their claim for additional GST payment. In contrast, the Government contended that allowing such claims would undermine the tendering process and lead to financial losses for the Government. The Court sided with the Government's position, emphasizing the need to maintain the sanctity of the contract terms and the competitive bidding process.Significant holdings:The Court held that the contractor was not entitled to claim GST over and above the quoted rates specified in the contract agreements. The Court dismissed the writ petitions, finding no merit in the petitioner's arguments.In conclusion, the Court determined that the contractor could not claim additional GST payment beyond the rates quoted in the contract, as the agreements clearly stated that the quoted rates were inclusive of GST. The judgment emphasized the importance of upholding contract terms and the integrity of the tendering process to prevent financial losses to the Government.