Sri Ezhumalaiyan Construction Vs State Tax Officer Inspection -1 (Madras High Court)
In Sri Ezhumalaiyan Construction vs State Tax Officer Inspection-1, the Madras High Court considered writ petitions challenging assessment orders dated 16.12.2025 for the tax periods 2022–2023 and 2023–2024, which demanded differential tax at 6% following an increase in GST rates.
The petitioner had entered into agreements with certain government-related entities prior to the issuance of Notification No. 3/2022, under which the applicable GST rate for services to government entities was 12%. Subsequently, with effect from 18.07.2022, the tax rate was increased to 18%, resulting in a differential tax liability of 6%. The concerned entities (respondents 6 to 8) acknowledged this change and issued communications stating that they had taken steps with the Government of Tamil Nadu to secure reimbursement of the additional tax amount.
The Court held that the petitioner’s challenge to the levy of 18% GST could not be sustained, as the authorities were bound to apply the revised rate in accordance with the notification for services rendered after 18.07.2022. Therefore, the demand of tax at 18% was valid in law.
However, the Court noted that the petitioner’s claim for reimbursement of the differential 6% tax was supported by communications from the contracting government entities, which had undertaken to obtain approval and funds for payment of the increased tax component. The Court referred to its earlier decisions where, in similar circumstances, directions were issued to ensure reimbursement by the government authorities and to prevent coercive recovery against contractors.
