Facts of the Case

The petitioner, GG Associates, was awarded a government contract by the Water Resources Department of the State of Chhattisgarh. At the time the work order was issued, GST on the contract was payable at 12%.

Subsequently, pursuant to the notification dated 18.07.2022, the applicable GST rate increased from 12% to 18%, resulting in an additional GST liability upon the petitioner.

The petitioner relied upon the amendment made by the Water Resources Department on 30.09.2022 to Clause 2.17.1 of the contract, which provided that where any new tax, levy, cess, or increase in GST or other statutory tax occurred after the tender date, the contractor would be entitled to reimbursement upon furnishing proof of payment.

The petitioner submitted a detailed representation dated 06.12.2022 seeking reimbursement of the additional GST liability. Since no decision had been taken by the authorities, the petitioner approached the High Court by filing the present writ petition.

 

Issues Involved

  1. Whether the petitioner was entitled to reimbursement of the additional GST liability arising from the increase in the GST rate from 12% to 18%.
  2. Whether the respondents were required to consider the petitioner's representation in light of the amended Clause 2.17.1 of the contract.
  3. Whether the High Court should direct the authorities to decide the pending representation within a specified time.

 

Petitioner’s Arguments

  • The work order was issued when GST was chargeable at 12%, whereas the subsequent increase to 18% imposed an additional statutory tax burden upon the contractor.
  • The Water Resources Department itself amended Clause 2.17.1 on 30.09.2022, specifically providing that any new tax, levy, cess, or increase in GST after the tender date would be reimbursed upon production of proof of payment.
  • The amended clause also contemplated recovery by the Government where tax rates were reduced. Therefore, by applying the same principle, the Government was equally obligated to reimburse the contractor where GST rates increased.
  • Since a detailed representation had already been submitted on 06.12.2022, the respondents should be directed to decide the same expeditiously.

 

Respondent’s Arguments

  • The State did not oppose the limited prayer for consideration of the petitioner's representation.
  • However, it was submitted that the representation should be examined strictly in accordance with the applicable contractual provisions and the governing law before any decision regarding reimbursement was taken.

 

Court Order / Findings

The High Court disposed of the writ petition with the following directions:

  • The respondent authorities shall consider and decide the petitioner's representation dated 06.12.2022 as early as possible, preferably within 90 days.
  • While deciding the representation, the authorities shall specifically consider the amendment made to Clause 2.17.1 of the contract on 30.09.2022.
  • The petitioner shall be at liberty to submit a fresh representation along with documentary evidence demonstrating the additional GST liability actually incurred.
  • If the representation is decided in favour of the petitioner, the respondents shall reimburse the additional GST amount without delay.

Accordingly, the writ petition was disposed of.

 

Important Clarification

  • An increase in GST after the tender date may be reimbursable where the contract expressly provides for reimbursement of enhanced statutory taxes.
  • Amended contractual clauses dealing with post-tender tax variations must be considered while deciding claims relating to additional GST liability.
  • The High Court did not itself grant reimbursement but directed the competent authority to decide the contractor's claim in accordance with the amended contractual provisions.
  • Contractors seeking reimbursement should submit documentary proof establishing the additional GST actually paid.

Sections / Provisions Involved

  • Goods and Services Tax (GST)
  • Clause 2.17.1 of the Contract Agreement (as amended on 30.09.2022)
  • Principles relating to reimbursement of statutory tax liability arising after the tender date
  • Article 226 of the Constitution of India

Link to download the order -

https://mytaxexpert.co.in/uploads/1782971510_183compressed.pdf

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