Facts of the Case

Continental Construction Company, Erode, was awarded a works contract by the Uppidamangalam Town Panchayat, Karur District, on 24.12.2021 for construction of weekly sandy stalls, shops and cattle sheds, at a time when the applicable GST rate stood at 12%. With effect from 18.07.2022, pursuant to a GST Council resolution, the rate was enhanced to 18%. The petitioner sought a mandamus directing the Town Panchayat authorities to pay the resulting 6% differential GST for the work executed after 18.07.2022, together with 18% interest, having represented the issue to the third respondent on 26.02.2024 without any response.

Issues Involved

  1. Whether a contractor executing a works contract for a local body is entitled to reimbursement of the differential GST when the tax rate is increased mid-contract by the GST Council.

Petitioner's Arguments

  • The rate hike from 12% to 18% with effect from 18.07.2022 arose after the contract had already been awarded, and the petitioner had made repeated requests for reimbursement of the resulting 6% differential, without response.
  • Since the incidence of GST is ultimately to be borne by the recipient of the supply, the Town Panchayat was liable to bear the increased tax burden.

Respondent's Arguments

  • The Government Advocate for the Town Panchayat and its officers did not seriously dispute the underlying principle but had simply not acted on the petitioner's representation.

Court Order / Findings

  • The Court observed that since the incidence of tax is to be borne by the recipient of the supply, the petitioner's request for reimbursement of the 6% differential merited consideration by the third respondent.
  • The Court directed the third respondent, the Executive Officer of the Town Panchayat, to consider and take steps to address the issue flagged in the petitioner's representation dated 26.02.2024, within four weeks of receipt of the order.
  • The writ petition was disposed of accordingly with no costs.

Important Clarification

  • Where the GST Council revises tax rates mid-contract, the additional tax burden is generally to be borne by the recipient of the supply (the contract-awarding authority), not absorbed by the contractor out of the fixed contract price.
  • Relief in such matters is typically a direction to the government body to consider the representation on merits within a fixed timeframe, rather than a direct money decree, leaving quantification to the authority in the first instance.

Sections Involved

  • CGST Act, 2017, Rate Notifications – GST Council-recommended rate revisions applicable to works contract services.
  • Principle of incidence of tax – recipient of supply ordinarily bears statutory tax increases under works contracts.

Decision – In Favour of

The decision is disposed of with directions, in part in favour of the assessee, Continental Construction Company — the Town Panchayat was directed to consider the reimbursement claim within four weeks, without a final money award being made by the Court itself.

Case Details

Madurai Bench of Madras High Court – W.P(MD)No.20633 of 2025 – Coram: Hon'ble Mr. Justice C. Saravanan – Order dated 30.07.2025.

Link to Download the Order

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