Karnataka High Court Directs Authorities To Decide Contractor's ₹2.99 Crore GST Claims

The Karnataka High Court on 29 August directed government authorities to consider and decide a civil contractor's claim for payment of Goods and Services Tax (GST) on road construction and improvement works.

Justice Sachin Shankar Magadum noted that government authorities must examine a civil contractor's claim for payment of GST on road construction and improvement works by scrutinising the tender conditions, invoices, bills and payments to determine whether the GST component had already been paid. The Bench held:

“Merely keeping the representations pending without taking a decision thereon would leave the petitioner without an efficacious remedy in respect of the claim asserted by him”

The order came on a writ petition filed by Shri Jinaraj and Co., a Class-I civil contractor, seeking payment of GST claimed on works executed for government authorities.

The contractor claimed that it was awarded various road construction and improvement works between 2018-19 and 2022-23. It submitted that although the tender rates initially included duties and taxes, GST was subsequently made applicable at 12%, resulting in an additional liability on the works executed.

It further submitted representations dated 19 August 2024 seeking payment of Rs. 2.61 crore, Rs. 25.18 lakh and Rs. 12.44 lakh towards GST for different works. As the authorities did not decide the representations, it approached the High Court.

The authorities opposed the claim, contending that the contractor had quoted rates inclusive of all taxes and duties and that the final bills had been scrutinised and paid after including the applicable GST. They argued that the contractor could not raise additional claims beyond the tendered and accepted rates.

The Court held that the contractor's grievance required consideration by the competent authorities. It observed that where GST is leviable on a taxable service and the service provider raises an invoice including the applicable GST, the service recipient must discharge the GST liability in accordance with law.

It further held that if the authorities maintained that the final bills already included 12% GST, they must demonstrate this through a proper and intelligible breakup of the amounts paid under the respective bills, identifying the portion attributable to GST.

The Bench directed the authorities to independently examine the tender conditions, bills, invoices, payments already made and the applicable GST liability while deciding the contractor's representations. It also directed the authorities to pass reasoned and speaking orders and communicate their decisions to the petitioner within six weeks from the date of receipt of a certified copy of the order.

Accordingly, the High Court partly allowed the writ petition.

For Petitioner: Advocate Sangram S. Kulkarni

For Respondent: Additional Government Advocate Sharad V. Magadum