Facts of the Case: The petitioner, Prabhakar S/o Rajendra Rao Kulkarni, a Class-I contractor from Bagalkot, had executed works contracts for the Bagalkot Town Development Authority (BTDA) under agreements entered into during the pre-GST era, when the Karnataka Value Added Tax Act, 2003 (KVAT Act) governed such contracts. With the introduction of the Central Goods and Services Tax Act, 2017 with effect from 1.7.2017, works contracts were treated as "deemed service" attracting GST at 18% (till 21.8.2017) and 12% thereafter — a levy not contemplated when the KVAT-era contract rates were fixed. The petitioner filed this writ petition under Articles 226 and 227 of the Constitution seeking a mandamus directing BTDA to pay Rs.5,20,393.92 towards this differential GST burden, with 18% per annum interest from the date of payment till realisation.

Issues Involved:

  1. Whether a contractor who executed works contracts for a State government agency under the pre-GST KVAT regime is entitled to be reimbursed the additional/differential tax burden arising from the subsequent transition to GST.

Petitioner's Arguments:

  • The shift from KVAT (4%/5%/12%) to GST (18%/12%) imposed a heavy, unforeseen additional tax burden on contracts already priced under the old regime.
  • State Government circulars dated 3.1.2020 and 14.12.2020 prescribed a specific methodology for computing the pre-GST/post-GST tax differential and directed that it be absorbed by the contracting department.
  • Other states (Maharashtra, Odisha, Andhra Pradesh, Telangana) and even Indian Railways had schemes absorbing this differential burden, and parity demanded the same treatment.
  • Relied on MAS Constructions v. Hubballi Dharwad Smart City Ltd. and other coordinate authorities recognising this class of claims.

Respondent's Arguments:

  • In the underlying coordinate bench matter this litigation follows, the State/authorities had contended that GST applies only to the portion of work executed after 1.7.2017, with pre-GST portions taxable under the erstwhile KVAT Act.
  • In the present proceeding, however, counsel for BTDA joined the petitioner in submitting that the issue stood squarely covered by the earlier ruling, without pressing independent opposition.

Court Order / Findings:

  • The Court held that the controversy was directly covered by the judgment of a Coordinate Bench in W.P. No.9721/2019 and connected matters (11.4.2023), which had already examined the KVAT-to-GST transition issue for identical class of contractors and directed absorption of the differential tax per the State circulars of 3.1.2020 and 14.12.2020.
  • On the same reasoning and "on all its fours," the present petition was disposed of in terms of the coordinate bench ruling, effectively directing BTDA to compute and pay the differential GST liability.

Important Clarification:

  • Where a works contract straddles the KVAT-to-GST transition of 1.7.2017, the differential tax burden for the post-GST portion of an already-agreed pre-GST rate must be computed as per the methodology laid down in the State Government's own circulars, and is to be absorbed by the contracting government/statutory authority rather than borne by the contractor.

Sections Involved:

  • Section 7(3) read with Schedule II Clause 6, Central Goods and Services Tax Act, 2017 — treatment of works contract as a deemed service.
  • Section 15, Karnataka Value Added Tax Act, 2003 — composition scheme applicable to works contractors in the pre-GST regime.
  • Articles 226 and 227 of the Constitution of India — writ jurisdiction invoked for the mandamus.

Decision – In Favour of: Assessee/Petitioner-Contractor. The Court directed BTDA to bear and pay the differential GST amount, following its own coordinate bench precedent.

Related Case Laws: This ruling should be read alongside the same petitioner's connected batch of writ petitions — Prabhakar Kulkarni vs Bagalkot Town Development Authority / Karnataka Neeravari Nigam Limited (WP No. 109381 of 2025 and connected matters) — decided the same day on identical reasoning, and the underlying coordinate bench decision in W.P. No. 9721/2019 and connected matters (11.4.2023) on the KVAT-to-GST transition for works contractors.

Case Details: High Court of Karnataka, Dharwad Bench | WP No. 109550 of 2025 (GM-RES) | NC: 2025:KHC-D:18252 | Coram: Hon'ble Mr. Justice M. Nagaprasanna | Date of Order: 15.12.2025.

Link to Download the Order: View/Download the Order

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