Facts of the Case

The appellant, a Class-A electrical contractor registered with the Kerala Public Works Department, was awarded a contract in 2019 for augmenting the power system at Government Medical College, Kozhikode, pursuant to a tender floated after GST came into force. He executed the works and was paid the total contract value of Rs.3,64,56,779 up to 31.03.2023, inclusive of GST deducted at source at 2%. The appellant contended that as a “works contract” under Section 2(119) of the GST Act, the composite contract was taxable at 12% (up to 31.12.2021) and 18% thereafter under successive rate notifications, and that although he had discharged this higher tax liability by declaring the contract receipts in his GST returns, the PWD had only deducted 2% TDS and never reimbursed the balance GST component. The Single Judge dismissed his writ petition, holding that his remedy lay before a civil court. The present writ appeal challenged that dismissal.

Issues Involved

  1. Whether the appellant is entitled, in writ jurisdiction, to a direction compelling the PWD to reimburse GST paid at 12%/18% on the works contract, over and above the 2% already deducted.
  2. Whether such a claim, involving interpretation of contract terms and applicable DSR (Delhi Schedule of Rates) provisions, is a disputed question of fact unsuited to adjudication under Article 226.

Petitioner's Arguments

  • The total estimate for the work ought to have been computed exclusive of GST, with GST payable additionally at the applicable rate.
  • The PWD deducted only 2% GST from the contract amount, while the appellant discharged the full 12%/18% liability out of his own pocket on the same receipts.
  • He is entitled to reimbursement of the differential tax actually paid to the Government.

Respondent's Arguments

  • The contract rates were based on 2016 DSR rates adopted for Government works, and therefore GST at the higher applicable rate could not additionally be paid to the contractor.
  • The dispute concerned interpretation of the specific contract terms and rate schedule, not a straightforward statutory entitlement.

Court Order / Findings

  • Whether the appellant is entitled to be paid GST at 12%/18% on the contract amount received is a disputed question of fact that necessarily involves interpretation of the terms of the contract between the parties.
  • Such an exercise of contract interpretation cannot be undertaken by a writ court exercising jurisdiction under Article 226.
  • The Division Bench found no illegality or impropriety in the Single Judge's judgment relegating the appellant to a civil court, and dismissed the writ appeal.

Important Clarification

  • While “works contract” under Section 2(119) of the GST Act is a defined statutory category taxable at prescribed composite rates, a contractor's entitlement to be reimbursed the GST component by a government employer, where the contract terms and rate basis are disputed, is a factual/contractual dispute — not a matter for writ adjudication.
  • Parties with such reimbursement disputes must approach the appropriate civil court for adjudication on the terms of the specific works contract.

Sections Involved

  • Section 2(119), GST Act, 2017 — definition of “works contract”.
  • Notification No.20/2017-Central Tax (Rate) — prescribing 12% rate for government works contracts up to 31.12.2021.
  • Notification No.15/2021-Central Tax (Rate) dated 18.11.2021 — enhancing the rate to 18% with effect from 01.01.2022.

Decision – In Favour of

Against the Appellant on the writ remedy — the writ appeal was dismissed, with the appellant relegated to pursue his reimbursement claim before a civil court; no finding was rendered on the merits of his GST entitlement.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WA No.1802 of 2023 (against WP(C) 32206/2023)
Coram: Dr. A. K. Jayasankaran Nambiar, J. and Dr. Kauser Edappagath, J.
Decision Date: 16.10.2023
Disposal Nature: Writ appeal dismissed

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