2024 (5) TMI 401 - HC - GST

Liability to pay the differential GST amount (being the difference between GST and VAT) for each the works contract / composite supply executed by the petitioner - works contract - HELD THAT - The issue involved in the present writ petitions would fall under category KVAT regime as is enunciated in SRI CHANDRASHEKARAIAH, M/S. GOVINDE GOWDA AND SONS, M/S. D.K. CONSTRUCTIONS, M/S. SRI AYYAPPA CONSTRUCTIONS, M/S. ANNAPOORNESHWARI CONSTRUCTIONS, M/S. BHOOMIKA BUILDERS, VERSUS THE STATE OF KARNATAKA, THE UNION OF INDIA, THE GOODS AND SERVICES TAX COUNCIL, PRINCIPAL COMMISSIONER OF CENTRAL TAX, COMMISSIONER OF COMMERCIAL TAXES, CAUVERY NEERAVARI NIGAMA LIMITED, AND OTHER 2023 (6) TMI 93 - KARNATAKA HIGH COURT where it was held that ' I find considerable force in the submission made by the learned Senior counsel for the petitioners that the tax component is an independent component which the petitioners do not retain as a profit and is a statutory payment to be made.' When there is a concluded contract and rate has been fixed in KVAT regime for the work contract as per schedule rate, petitioners cannot be directed to pay the Goods and Service Tax for the work that they have completed and received payment. SCN in respect of the writ petitioners are without any basis - Petition allowed.

Summary

Issues Involved:
The issues involve the payment of GST on works contracts executed under the VAT regime, the validity of show cause notices issued under the GST Act, and the applicability of amended provisions post-GST regime.

Judgment Details:

Issue 1: Payment of Differential GST Amount
The writ petitions sought a writ of mandamus directing the respondents to pay the differential GST amount for works contracts executed under the VAT regime. The petitioners, civil contractors, argued that the schedule rates were fixed under the KVAT regime, and therefore, the show cause notices and orders issued under the GST Act were incorrect. They relied on a previous court order emphasizing that tax components are statutory payments to be honored by the respondents. The court agreed with the petitioners, stating that when a contract is concluded with rates fixed under the KVAT regime, petitioners cannot be directed to pay GST for completed work. Consequently, the show cause notices and orders were deemed baseless and quashed.

Issue 2: Validity of Show Cause Notices
The respondents argued that post-amendment to the GST Act, petitioners are obligated to pay taxes as per the amended provisions, not the rates fixed in agreements. They contended that citizens must adhere strictly to fiscal statutes. However, the court held that in cases where contracts were finalized under the KVAT regime with rates pre-GST, petitioners cannot be forced to pay GST for completed work. The court found the show cause notices and orders to be unfounded and lacking basis, leading to their quashing.

Conclusion:
The High Court of Karnataka allowed the writ petitions, thereby quashing the show cause notice and order issued to the petitioners. The court emphasized that when contracts were entered into under the KVAT regime with rates fixed accordingly, petitioners cannot be compelled to pay GST for completed work. The judgment highlighted the necessity to honor statutory tax components and concluded that the show cause notices and orders lacked merit in the given circumstances.