Facts of the Case

The petitioners filed a writ petition before the Calcutta High Court seeking directions against the State authorities to bear the additional GST liability arising from the execution of subsisting Government contracts. The grievance related to contracts awarded either before or after the implementation of the Goods and Services Tax (GST), where the Schedule of Rates (SOR) had not been updated to incorporate GST while preparing the Bill of Quantities (BOQ). The petitioners further requested that the State neutralize the unforeseen additional tax burden caused by the introduction of GST with effect from 1 July 2017 in respect of ongoing Government contracts awarded prior to the GST regime and update the State SOR by replacing the earlier VAT-based rates with GST-compliant rates.

Issues Involved

  1. Whether Government authorities should bear the additional GST liability arising due to non-revision of the Schedule of Rates (SOR) in Government contracts.
  2. Whether contractors executing ongoing Government contracts awarded before the introduction of GST are entitled to relief against the additional tax burden.
  3. Whether the State should revise the SOR and BOQ to incorporate applicable GST instead of the repealed VAT structure.

Petitioner’s Arguments

  • The petitioners contended that Government contracts were awarded without updating the Schedule of Rates to reflect GST, resulting in an unforeseen and additional tax burden on contractors.
  • It was argued that contractors executing Government works should not be compelled to bear the financial consequences of the transition from the VAT regime to the GST regime.
  • The petitioners sought appropriate directions requiring the State authorities to compensate or neutralize the additional GST liability and update the applicable Schedule of Rates for future Government contracts.

Respondent’s Arguments

  • The State authorities opposed the writ petition.
  • During the hearing, it was submitted that the issues raised by the petitioners required consideration by the competent Government authority, namely the Additional Chief Secretary, Finance Department, Government of West Bengal.

Court Order / Findings

The Calcutta High Court disposed of the writ petition by granting liberty to the petitioners to submit detailed representations before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks.

The Court directed that:

  • The Additional Chief Secretary shall take a final decision within four months after receipt of the representation.
  • The decision shall be taken after consultation with all relevant Government departments.
  • The petitioners or their authorised representatives shall be given an opportunity of hearing.
  • No coercive action shall be taken against the petitioners until the final decision is taken.
  • If the petitioners fail to submit the representation within the prescribed period, the benefit of the Court's order shall cease.
  • The competent authority shall pass a reasoned and speaking order in accordance with law after considering the judgments of various High Courts relied upon by the petitioners.

Important Clarification

The High Court did not adjudicate the merits of the claim regarding reimbursement of GST liability. Instead, it directed the competent Government authority to examine the petitioners' grievance independently, provide an opportunity of hearing, consider the applicable legal precedents, and pass a reasoned order. Pending such decision, the petitioners were protected from coercive action.

Section Involved

  • Article 226 of the Constitution of India
  • Goods and Services Tax (GST) relating to Government Contracts, Schedule of Rates (SOR), Bill of Quantities (BOQ), and transition from VAT to GST.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785391450_2307compressed.pdf

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