Facts of the Case

The petitioner, EKK Infrastructure Limited, a construction company, was awarded two road contracts by the Kerala State Transport Project (KSTP) under the World Bank-funded Kerala Rebuild Initiative — upgradation of the Painavu-Thannikandom-Ashoka Kavala road (Rs.95.40 crore, W.P.(C) No.12471/2021) and BC Overlay of Adoor to Chengannoor (Rs.98.10 crore, W.P.(C) No.12454/2021). In both cases, the bid documents (the Letter of Bid-Financial Part) specifically directed bidders to quote the total price excluding GST, with the online bidding format providing no column to separately enter a GST component. After the contracts were awarded and executed, the petitioner sought reimbursement of GST at 12% on the bills raised, but KSTP approved only a small fraction, relying on Clause 19.1.2 of the contract stating the contract price was inclusive of all duties, taxes, royalty and fees. Both writ petitions were heard together.

Issues Involved

  1. Whether, where the tender documents expressly required bidders to quote prices excluding GST, the employer could nonetheless treat the contract price as GST-inclusive based on a general clause elsewhere in the contract.
  2. Whether the petitioner was entitled to reimbursement of the GST component in addition to its quoted bid price.

Petitioner's Arguments

  • The petitioner relied on CBIC/State Finance Department Circular dated 01.03.2019 clarifying that bid amounts should exclude GST but include other taxes and duties, and on Clause 12.1 of the Letter of Bid requiring the online format to be completed without alteration, with the price expressly quoted excluding GST.
  • Heavy reliance was placed on Sebastian Jose v. State of Kerala, 2021 (5) KLT 445 (affirmed in appeal, W.A. No.1710/2021, 22.06.2022), and on George C.A. v. State of Kerala, 2021 KHC 2682, both holding that where the tender notice clearly directs quoting rates excluding GST, the employer cannot later contend the bidder should have included it.

Respondent's Arguments

  • KSTP contended that Clause 19.1.2 of the contract made the price inclusive of all duties, taxes, royalty and fees, that the primary liability to pay GST as a works contractor lay on the petitioner, and that the GST-exclusive provision in the Letter of Bid-Financial Part was a typographical error later corrected for future tenders.
  • Reliance was placed on an earlier ruling (W.P.(C) No.27226/2018) concerning the transition from 4% VAT to 12% GST, to argue the tax-rate differential should be borne by the contractor.

Court Order / Findings

  • The Court found it undisputed that the bid documents required the price to be quoted excluding GST, a requirement the respondents did not dispute even while contending the overall contract was tax-inclusive.
  • Following its own Division Bench ruling in W.A. No.1710/2021 (affirming Sebastian Jose), the Court held that since GST is a tax ultimately borne by the beneficiary of the work, and the notice inviting tender specifically required quoting the price net of GST, the employer — here KSTP — must pay the GST component in addition to the quoted contract price.
  • The precedent relied upon by the respondents (on the VAT-to-GST rate transition) was distinguished as addressing only a change in tax rate, not a case where the bid amount itself was required to exclude GST altogether.
  • Both writ petitions were allowed, the impugned rejection orders set aside, and the respondents directed to consider the petitioner's GST claim and release the amounts due within two months.

Important Clarification

  • Where a notice inviting tender/bid documents expressly and specifically direct bidders to quote their price excluding GST, the employer cannot subsequently rely on a general 'inclusive-of-all-taxes' clause elsewhere in the contract to deny reimbursement of the GST component — the specific tender condition governs.
  • GST being a tax ultimately meant to be borne by the recipient of the supply, the government/public employer receiving the works-contract service is liable to bear the GST component over and above the quoted (GST-exclusive) contract price in such cases.

Sections Involved

  • Central Goods and Services Tax Act, 2017 – governs the substantive GST liability on the works contract executed by the petitioner.
  • Finance (Industries & Public Works-B) Department Circular No.18/2019/FIN dated 01.03.2019 (Government of Kerala) – clarifies that tender bid amounts should exclude GST while including other taxes and duties.

Decision – In Favour of

The decision is in favour of the Assessee — both writ petitions were allowed, with the employer directed to bear the GST component in addition to the quoted, GST-exclusive tender price.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No.12471 of 2021 and connected WP(C) No.12454 of 2021
Coram: Justice Anu Sivaraman
Date of Order: 26.07.2023

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