Facts of the Case

The Petitioner challenged the action of the Opposite Parties in not reimbursing the differential tax amount arising from the transition from the Value Added Tax regime to the Goods and Services Tax regime with effect from 01.07.2017.

The grievance arose in relation to a works contract where, due to the introduction of GST, the Petitioner was required to bear tax liability that was allegedly not envisaged at the time of entering into the agreement. The Court noted that a batch of writ petitions had been filed concerning difficulties faced by contractors because of the change in the taxation regime applicable to works contracts.

The Petitioner submitted that the present writ petition was identical to W.P.(C) No. 5933 of 2020 and requested disposal in terms of the order dated 18.02.2020 passed in that matter. The State did not dispute this position.

Issues Involved

The principal issues before the Court were:

  1. Whether a works contractor is entitled to consideration of reimbursement of the differential tax burden arising from the transition from VAT and other subsumed indirect taxes to GST with effect from 01.07.2017.
  2. Whether additional GST liability relating to works tendered before 01.07.2017 but executed wholly or partly thereafter should be determined under the revised guidelines issued by the Government of Odisha, Finance Department, on 10.12.2018.
  3. Whether the competent authority should recalculate the GST-inclusive value of balance work executed after 30.06.2017 and reimburse any excess amount where the revised GST-inclusive value exceeds the original agreement value.
  4. Whether the Petitioner’s grievance should first be considered by the appropriate authority through a comprehensive representation under the revised State Government guidelines.

Petitioner’s Arguments

The Petitioner contended that:

  • The Opposite Parties had failed to reimburse the differential tax amount arising from the transition from VAT to GST with effect from 01.07.2017.
  • GST imposed a tax burden that had not been envisaged when the original agreement was entered into.
  • The present writ petition was identical to W.P.(C) No. 5933 of 2020 and should therefore be disposed of in terms of the order dated 18.02.2020 passed in that case.
  • The grievance concerning additional tax liability required consideration under the revised guidelines governing works contracts under GST.

Respondent’s Arguments

The learned Additional Standing Counsel appearing for the State did not dispute the Petitioner’s submission that the present writ petition was identical to W.P.(C) No. 5933 of 2020.

The record further reflected that the Government of Odisha had issued revised guidelines through Finance Department Office Memorandum No. FIN-CTITAX-0045-2017/38535/F dated 10.12.2018, superseding the earlier guidelines dated 07.12.2017, for dealing with works contracts affected by GST implementation.

Court Order / Findings

The High Court took note of the revised guidelines dated 10.12.2018 issued by the Finance Department, Government of Odisha, concerning works contracts under GST.

The Court directed the Petitioner to make a comprehensive representation before the appropriate authority within two weeks from the date of the order, setting out the grievance.

If such representation was filed, the competent authority was directed to:

  • consider the Petitioner’s grievance in light of the revised guidelines dated 10.12.2018;
  • dispose of the representation as expeditiously as possible; and
  • preferably complete the exercise by 02.01.2023.

The Court further clarified that if the Petitioner remained aggrieved by the authority’s decision, it would be open to the Petitioner to challenge that decision in accordance with law.

Accordingly, the writ petition was disposed of.

Important Clarification

The High Court did not directly order automatic payment or unconditional reimbursement of the differential GST amount. Instead, it directed the Petitioner to submit a comprehensive representation and required the appropriate authority to consider the claim under the revised Odisha Government guidelines dated 10.12.2018.

The revised guidelines provide a structured mechanism for contracts where tenders were invited before 01.07.2017 on the basis of SoR-2014 but payment for full or balance work was made after GST implementation. The mechanism broadly requires:

  • ascertainment of item-wise work executed after 30.06.2017;
  • determination of the value of balance work under the Revised SoR-2014;
  • removal of embedded pre-GST tax components where relevant;
  • adjustment according to the original tender premium or discount;
  • addition of the applicable GST rate, namely 5%, 12% or 18%, as the case may be;
  • reimbursement to the contractor where the revised GST-inclusive value exceeds the original agreement value for the balance work; and
  • corresponding reduction or recovery where the revised GST-inclusive value is lower.

The guidelines also state that the procedure applies to works contracts including EPC, Turn-key and Lumpsum contracts. In the case of F2 contracts, the taxable value for each item of balance work is to be determined by the competent authority by applying the premium or discount offered by the contractor to the respective item.

Sections / Legal Provisions and Instruments Involved

  • Goods and Services Tax regime effective from 01.07.2017
  • Works contract treated as a composite supply of service under GST
  • Applicable GST rates referred to in the revised guidelines: 5%, 12% or 18%, depending upon the nature of the works contract
  • Odisha Finance Department revised guidelines for works contracts under GST
  • Office Memorandum No. FIN-CTITAX-0045-2017/38535/F dated 10.12.2018
  • Earlier Finance Department guidelines dated 07.12.2017, superseded by the revised guidelines
  • Revised Schedule of Rates-2014 (SoR-2014) effective from 01.07.2017
  • Works Department O.M. No. 13827/WD dated 16.09.2017

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783313892_1005compressed.pdf

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