2021 (7) TMI 384 - HC - GST

Liability of make payment of GST - works contract - payment/reimbursement of the applicable GST on the amount of work executed - Works Contract executed prior to GST implementation i.e. 01.07.2017 and work of which were continued post 01.07.2017 - burden of GST on contractor alone or not? - HELD THAT - It is deemed proper to direct the respondent No.1- Principal Secretary, Public Works Department, Government of M.P., Bhopal to decide the said representation which will be filed by the petitioner by a speaking order after providing opportunity of hearing to the representative of the petitioner within a period of three months from the date copy of this order is produced before him. Writ petition disposed off.

Summary

Issues:
1. Relief sought by the petitioner through writ petition.
2. Dispute related to GST payment on construction contracts pre and post GST implementation.
3. Applicability of GST rates and input tax credit on construction material.
4. Comparison of tax liabilities pre and post GST implementation.
5. Interpretation of government orders regarding GST payment on works contracts.
6. Representation submitted by the petitioner for redressal of grievance.
7. Court's direction to the respondent for decision on the representation.

Analysis:
1. The petitioner, a construction company, sought relief through the writ petition, requesting the court to issue a Writ of Certiorari to set aside the impugned order dated 20.12.2020, a Writ of Mandamus to direct the respondents to dispose of a representation dated 28.02.2021, and another Writ of Mandamus to direct the respondents to make payment/reimbursement of applicable GST on executed work and relieve the petitioner from GST liabilities related to the contract under reference. Additionally, an alternative relief was requested for the respondents to formulate a policy for dealing with GST payment on works contracts executed before GST implementation.

2. The dispute revolved around the GST payment on construction contracts undertaken by the petitioner before and after the GST implementation on 01.07.2017. The petitioner faced an additional burden due to the transition from VAT to GST, leading to a request for GST payment on work executed post-GST implementation, which was denied by the respondent based on the absence of a provision in the agreement.

3. The petitioner's counsel highlighted the disparity in tax rates and input tax credit between the VAT regime and the GST regime. Under VAT, the tax rate on material purchased was 5%, with a 2% liability under the Tax (Advance Commercial Tax Head), which was adjusted at the time of filing returns. However, post-GST implementation, the GST rates on construction material ranged from 5% to 28%, with no provision for input tax credit for works contracts, and an additional 12% GST on the bill amount.

4. The comparison of tax liabilities pre and post GST implementation emphasized the challenges faced by the petitioner due to the increased GST rates and the lack of input tax credit for works contracts. The petitioner's financial calculations and adjustments based on the previous tax regime were disrupted by the new GST framework, leading to financial implications.

5. The interpretation of government orders regarding GST payment on works contracts highlighted the measures taken by the Madhya Pradesh government to address the GST implications. Orders issued by different departments emphasized the separate payment of GST to contractors at applicable rates, registration requirements, and exclusion of GST from financial offers in tender invitations post-GST implementation.

6. The petitioner submitted a detailed representation to various government authorities seeking redressal of the GST payment issue on works contracts. Reference was made to a similar case where the court had passed a final order, indicating the petitioner's intention to file a comprehensive representation based on the previous court order for addressing their grievance.

7. The court, after considering the submissions and arguments, directed the Principal Secretary, Public Works Department, Government of Madhya Pradesh, to decide on the petitioner's representation by a speaking order within three months from the date of the court's order. This direction led to the disposal of the writ petition with the specified directive for the respondent to address the petitioner's concerns regarding GST payment on construction contracts.