Facts of the Case

This common judgment disposed of a batch of seven connected writ petitions filed by PWD and Municipal Board works contractors across Assam, led by petitioner Mintoo Das. Each petitioner had been awarded works contracts (roads, drains, buildings, health centres) before 1.7.2017 under the pre-GST Assam Value Added Tax Act, 2003 regime, quoting rates that factored in 5% VAT. After the Assam Goods and Service Tax Act, 2017 and CGST Act came into force, bills raised or paid on or after 1.7.2017 attracted 12% GST instead of 5% VAT, imposing an unbudgeted 7% burden. Relying on Circular No.3/2017-GST dated 24.08.2017 and its clarificatory Circular No.6/2017-GST dated 05.09.2017, the authorities deducted GST at source wherever invoices or payments fell on or after 1.7.2017, irrespective of when the contract was awarded. The petitioners challenged Circular No.3/2017-GST as arbitrary and sought either continuation of VAT-era rates or, alternatively, reimbursement of the differential 7% tax from the contract-awarding PWD divisions and the Hailakandi Municipal Board; interim orders in several petitions had restrained coercive recovery pending disposal.

Issues Involved

  1. Whether GST liability on works contracts spanning the VAT-to-GST transition is governed by the Assam VAT Act, 2003 or the Assam GST Act, 2017/CGST Act, based on invoice and payment dates.
  2. Whether Circular No.3/2017-GST dated 24.08.2017 (as clarified by Circular No.6/2017-GST) is valid and consistent with Sections 12 and 13 of the GST Act.
  3. If GST liability is upheld, whether the contractors are entitled to reimbursement of the additional tax burden from the contract-awarding authorities under Section 64A of the Sale of Goods Act, 1930, or Section 171 of the GST Act.

Petitioner's Arguments

  • Contracts and tender rates were fixed before GST commenced, factoring in only 5% VAT; imposing 12% GST on those contracts after the fact is arbitrary and unfair.
  • Circular No.3/2017-GST should be interfered with as it disregards the pre-existing contractual price structure agreed under the VAT regime.
  • Alternatively, since the increased tax burden arose from a change in law after the contract was concluded, the contract-awarding departments should reimburse the additional 7% GST.

Respondent's Arguments

  • Tax liability arises on the taxable event of supply; under Sections 12 and 13 of the GST Act, liability follows the earlier of the invoice date or the payment date.
  • Where invoices were raised or payments made on or after 1.7.2017, GST (not VAT) applies per Circular No.3/2017-GST and Circular No.6/2017-GST, regardless of when the contract was originally awarded.
  • The circulars merely clarify the statutory position and were not shown to be inconsistent with Sections 12 and 13 of the GST Act.

Court Order/Findings

  • The Court held that Sections 12 and 13 of the Assam GST Act, 2017/CGST Act, read with Schedule II entry 6(a), govern the time of supply for works contracts, and that Circular No.3/2017-GST is consistent with these provisions.
  • The Court upheld Circular No.3/2017-GST, holding that where invoices are raised and/or payment is received on or after 1.7.2017, GST liability (not VAT) applies, and dismissed the challenge to the circular; contractors are liable to pay GST at the applicable rate on such invoices/payments.
  • On the reimbursement question, entitlement under Section 64A of the Sale of Goods Act, 1930 was held to depend on (i) absence of a "firm price" clause precluding price adjustment, and (ii) the tax change occurring after the contract date — fact-specific inquiries that could not be resolved for want of complete contract documents before the Court.
  • Section 171 (anti-profiteering) of the GST Act was flagged as potentially relevant to any claim concerning passing on of ITC benefits.
  • The writ petitions were disposed of upholding the circular, with liberty granted to the petitioners to file representations before the respective contract-awarding authorities, to be decided within six months in light of the propositions of law laid down in the judgment.

Important Clarification

  • For works contracts spanning the VAT-to-GST transition, tax liability is determined by the date of invoice or payment (whichever is earlier) under Sections 12/13 of the GST Act, not by the date the contract or tender was originally awarded.
  • A contractor's entitlement to pass on an increased tax burden to the employer depends on the specific terms of the underlying contract — particularly whether the price was a "firm price" excluding adjustment — and cannot be presumed merely because GST rates exceeded the earlier VAT rate.

Sections Involved

  • Section 12, Assam GST Act, 2017 / CGST Act, 2017 – time of supply of goods.
  • Section 13, Assam GST Act, 2017 / CGST Act, 2017 – time of supply of services.
  • Section 51, Assam GST Act, 2017 / CGST Act, 2017 – tax deduction at source under GST.
  • Section 171, CGST Act, 2017 – anti-profiteering measure.
  • Section 64A, Sale of Goods Act, 1930 – price adjustment on account of change in tax.
  • Section 47, Assam VAT Act, 2003 – tax deduction at source under the pre-GST regime.

Decision – In Favour of

Mixed – substantially in favour of the department on the core legal question, since Circular No.3/2017-GST was upheld and the contractors held liable to GST based on invoice/payment dates; the matter was disposed of with directions giving the petitioners liberty to seek reimbursement from the contracting departments, so it is not a clean win for either side on the reimbursement claim.

Related Case Laws

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

Case Details

  • Court: Gauhati High Court (High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
  • Case No.: WP(C)/4201/2020 (with connected WP(C)/1610/2019, WP(C)/3694/2019, WP(C)/9052/2019, WP(C)/7169/2018, WP(C)/7571/2019, WP(C)/8628/2019)
  • CNR: GAHC010140022020
  • Coram: Hon'ble Mr. Justice Dev Ashis Baruah
  • Decision Date: 21.11.2023
  • Disposal Nature: Disposed of with directions (Circular No.3/2017-GST upheld; GST liability determined by invoice/payment dates; petitioners given liberty to seek reimbursement of differential tax)

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