Facts of the Case

M/S PMJ Constructions Pvt Ltd, a road contractor for the Bruhat Bengaluru Mahanagara Palike (BBMP), was awarded works on 20.03.2013 and 29.10.2015, priced under the pre-GST VAT/Service Tax regime, but partly executed after the introduction of GST on 01.07.2017. The petitioner sought a mandamus directing BBMP to reimburse the differential Goods and Services Tax at 8% along with statutory interest under Section 50 of the CGST Act, 2017 at 18% per annum, for the portion of work executed in the GST era. BBMP had withheld the differential tax despite not disputing execution of the work, insisting on production of a GST department certificate before reimbursement.

Issues Involved

  1. Whether a government body (BBMP) that awarded a works contract under the VAT regime is legally obliged to reimburse the differential GST liability arising for the portion of the contract executed after the GST regime commenced.
  2. Whether BBMP's insistence on a departmental GST certificate as a pre-condition for reimbursement has any statutory basis.

Petitioner's Arguments

  • Under Section 142(10) of the CGST Act, goods or services supplied after 01.07.2017 are liable to GST regardless of when the underlying contract was entered into, and the petitioner had duly discharged its GST liability, evidenced by GST returns, audited financials and a Chartered Accountant's certificate.
  • Following the binding guidelines in Chandrashekariah v. State of Karnataka, [2024] 158 taxmann.com 443 (Karnataka), BBMP was obligated to bifurcate the contract value pre- and post-GST and reimburse the differential tax for the post-GST portion.
  • BBMP's demand for a GST department certificate, not contemplated by the CGST Act, the contract, or any circular, was an arbitrary and non-existent procedural burden, and its refusal to reimburse despite reaping the benefit of the completed work offended the doctrine of promissory estoppel.

Respondent's Arguments

  • BBMP resisted reimbursement principally on the ground that the petitioner had not produced a certificate from the jurisdictional GST officer confirming discharge of GST liability, treating this as a pre-condition for payment.

Court Order / Findings

  • The Court extensively relied on Chandrashekariah's guidelines directing government departments to compute the tax differential for works straddling the VAT-to-GST transition and reimburse contractors accordingly, along with Section 142(10) of the CGST Act mandating GST liability for post-01.07.2017 supplies regardless of contract date.
  • The Court held that BBMP's insistence on a GST department certificate as a pre-condition for reimbursement has no foundation under the CGST Act, SGST Act, or any subordinate legislation, and that Sections 31 and 39 read with Rules 56 and 66 make filed GST returns conclusive evidence of tax discharge.
  • Since the petitioner had already paid the differential tax and filed the requisite GST returns, unlike in Chandrashekariah where neither party had paid the tax, the Court found the refusal unsustainable and BBMP's conduct arbitrary and violative of promissory estoppel.
  • BBMP was directed to reimburse Rs 2,23,23,979.92 to the petitioner towards the differential tax component within two months from receipt of the order.

Important Clarification

  • Section 142(10) of the CGST Act makes clear that any supply executed on or after 01.07.2017 attracts GST irrespective of when the underlying contract was signed, obligating government employers to bear the resulting differential tax burden on works contracts.
  • Filed GST returns (GSTR-1, GSTR-3B), backed by a Chartered Accountant's certification, are conclusive evidence of tax discharge; a government body cannot invent an extra-statutory requirement of a departmental certificate to withhold reimbursement.
  • Where the contractor has already paid the differential tax to the exchequer, courts are more inclined to order direct reimbursement rather than mere procedural directions.

Sections Involved

  • Section 142(10), CGST Act, 2017 – tax liability on goods/services supplied after the appointed day, notwithstanding pre-GST contracts.
  • Sections 31 & 39, CGST Act, 2017 read with Rules 56 & 66, CGST Rules, 2017 – tax invoice and return filing as evidence of tax discharge.

Decision – In Favour of

The decision is in favour of the assessee, M/S PMJ Constructions Pvt Ltd — BBMP was directed to reimburse the entire differential GST amount claimed.

Case Details

High Court of Karnataka at Bengaluru – Writ Petition No. 461 of 2023 (LB-TAX) – Coram: Hon'ble Mr. Justice Sachin Shankar Magadum – Order dated 25.07.2025.

Link to Download the Order

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