Facts of the Case

The petitioner, M.G. Arunkumar, a registered civil contractor, was the successful bidder for road works awarded by the Executive Engineer, Project Division (PMGSY), Karwar, under a work order dated 27.09.2017 — post the introduction of GST. Having carried out the work, the petitioner claimed that the department, as the service recipient, was liable to pay GST at 12% on the total value of completed work per the agreement, amounting to Rs.99,87,960/- on a work value of Rs.8,32,33,000/-. Despite submitting a representation seeking reimbursement, the department took no action, prompting the petitioner to approach the Karnataka High Court seeking a mandamus.

Issues Involved

  1. Whether the government department, as service recipient under a post-GST tender, was liable to reimburse GST at 12% on the value of work completed by the contractor.

Petitioner's Arguments

  • The petitioner submitted that the entire tender process and work allocation occurred after GST came into force, that he had discharged his statutory obligation to pay GST as a class-I contractor, and that the department, as service recipient, was correspondingly obligated to reimburse the GST component, which it had failed to do despite a representation.

Respondent's Arguments

The order records no contest of the underlying facts by the respondent department; the petition proceeded essentially unopposed on the core reimbursement obligation.

Court Order / Findings

  • The Court found it undisputed that the tender process and work allocation post-dated the introduction of GST, and that the petitioner, having completed the tendered work, was entitled to have the department reimburse the applicable GST.
  • The Court held that the respondent/Department, being the service recipient, was under a bounden statutory duty to reimburse the GST amount in terms of Section 13 of the CGST Act, and that total inaction in the face of a specific representation made this a fit case for issuance of mandamus.
  • The writ petition was allowed, and the respondent was directed to reimburse the GST amount of Rs.99,87,960/- as claimed in the representation, within six weeks.

Important Clarification

  • Where a government works contract is tendered and executed after the introduction of GST, the procuring department, as recipient of the contractor's services, is under a statutory obligation to bear/reimburse the applicable GST component on the contract value, and unexplained departmental inaction on a reimbursement claim can be remedied by mandamus.

Sections Involved

  • Section 13, Central Goods and Services Tax Act, 2017 – time of supply of services, relied upon as the basis of the department's obligation to bear the GST component on a post-GST contract.

Decision – In Favour of

The decision is in favour of the Assessee — mandamus was issued directing full reimbursement of the GST amount within six weeks.

Case Details

Court: High Court of Karnataka, Dharwad Bench
Case No.: Writ Petition No. 104901 of 2023 (GM-RES)
Neutral Citation: 2023:KHC-D:9629
Coram: Justice Sachin Shankar Magadum
Date of Order: 29.08.2023

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