D. Sureshbabu Vs Kerala State Electricity Board Ltd. (Kerala High Court)
The Kerala High Court considered a writ petition filed by an A Class Government contractor who had undertaken three civil works for the Kerala State Electricity Board under work orders dated 31.5.2017, 3.8.2017, and 30.8.2018. Although one work order was issued before the introduction of the Goods and Services Tax (GST) regime, the petitioner contended that the actual commencement of that work was on 25.8.2017. All three works were completed after the introduction of GST on 1.7.2017.
The petitioner contended that, following the implementation of GST, all works executed were governed by the GST regime and that no liability could remain for Kerala Value Added Tax (KVAT) or other State taxes. According to the petitioner, after completion of the works and submission of the contract bills, the respondents illegally recovered amounts corresponding to KVAT while also recovering GST, resulting in double taxation. The petitioner challenged Ext.P9 on the ground that it was illegal and arbitrary.
The respondents filed a counter affidavit stating that the settlement of bills and release of payments had been carried out strictly in accordance with the GST regime and that no amounts had been recovered towards VAT work contract tax or Service Tax. Relying on Ext.R1(a), they submitted that the contract rates quoted by the petitioner were inclusive of all taxes and duties under Clause 11.4. According to the respondents, the quoted tax components included 4% work contract tax and 3% Service Tax. Since the bills were settled after GST came into force, these earlier tax components were not separately payable. Instead, GST at 18% was added over and above the admissible contract value because the liability to remit GST rested with the contractor. The respondents therefore maintained that the petitioner could not simultaneously claim work contract tax, Service Tax, and GST.
The respondents also relied upon Ext.R1(b) series, comprising the bills paid to the petitioner. They explained that an amount equivalent to the work contract tax and Service Tax included in the quoted tender amount had been deducted from the contract value, following which GST at 18% was added to determine the final value of the work. Payments were then released after effecting the agreed deductions.
The High Court noted that both parties admitted that, although one of the works commenced before the GST regime, all three works were completed after GST had come into force. Examining Ext.R1(b) series, the Court found that the amounts quoted towards KVAT liability in the tender had been deducted from the contract amount before adding GST. On that basis, the Court held that the petitioner’s contention of double taxation under both KVAT and GST was not sustainable.
The petitioner further argued that the quantification reflected in Ext.R1(b) series was incorrect and required recalculation. The Court observed that Ext.P9 merely explained the bills contained in Ext.R1(b) and specifically recorded that the petitioner had submitted the tender by including KVAT and Service Tax liability. Since KVAT had ceased to exist, those amounts were deducted from the bill amount, and GST at 18% was added to determine the total contract value. The Court found this explanation to be consistent with the statutory provisions and held that there was no reason to interfere with Ext.P9.
However, with regard to the petitioner’s grievance concerning the correctness of the calculations in Ext.R1(b), the Court held that this constituted a factual dispute requiring consideration before the appropriate forum. While sustaining Ext.P9, the Court directed the respondents to consider the petitioner’s grievance regarding the calculation of the amounts reflected in Ext.R1(b) series. The petitioner was granted liberty to approach the appropriate jurisdictional authorities to resolve any such dispute. The writ petition was accordingly disposed of with the above directions.
HC Upholds GST-Based Contract Bill Settlement, Rejects KVAT and GST Double Taxation Claim
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
Petitioner, an A Class Government contractor, had undertaken three civil works of the 1st respondent, Electricity Board, evidenced by Exts. P1, P2 and P3. Ext.P1 work order is dated 31.5.2017, Ext.P2 is dated 03.8.2017, and Ext.P3 is dated 30.8.2018. Even though the official date of commencement of work in respect of Ext.P1 is 31.5.2017, going by Ext.P4, the actual date of commencement of work is 25.8.2017. While so, the tax regime in India changed, and the Value Added Tax (for short “VAT”) and Service Tax were replaced by a single tax, namely Goods and Services Tax (for short “GST”), which commenced its operation on 1.7.2017. Therefore, it is the contention of the petitioner that on and from 1.7.2017, all works executed would have to be governed by the provisions of the Goods and Services Tax (GST) Act, 2017, and no tax liability can be effective for realizing the VAT and other State Taxes. It is the contention of the petitioner that, after the works were completed, he submitted the contract bills, and the respondent illegally recovered amounts additionally from the bills of the petitioner corresponding to Kerala Value Added Tax (for short ‘KVAT’) and, in addition thereto, recovered amounts under GST. The petitioner, therefore, challenges Ext.P9 order, which according to him is illegal and arbitrary.
2. When the matter came up for hearing on 22.6.2026, the learned counsel for the respondents sought time to file a counter affidavit in the matter.
3. I have gone through the counter affidavit filed by the respondents. The respondents have taken up a contention that the settlement of bills and release of payments in the said works were carried out in accordance with the statutory provisions contained in the GST regime and that no amounts were recovered towards VAT work contract tax or Service Tax. Relying on Ext.R1(a), the respondents contend that the rates quoted by the petitioner were inclusive of all taxes and duties, as provided under Clause 11.4, and that the tax liability towards work contract tax was 4% and Service Tax was 3%. Since the bills came to be settled after the introduction of the GST regime, the said tax components were not payable separately, and instead, GST @ 18% was released to the petitioner over and above the admissible contract value, as the liability to remit GST vested with the contractor. The respondents, therefore, submit that the petitioner cannot simultaneously claim release of work contract tax and Service Tax, as the GST component has already been added and disbursed to the petitioner.
4. The respondents have drawn my attention to Ext.R1(b) series, which are the bills paid to the petitioner. According to the learned counsel for the respondents, from out of the total bill amount, the amount equal to the tax liability under work contract tax and Service Tax was deducted, and on the amount so arrived at, 18% GST was added, and the total value of the work was thereafter determined. Payments were released after effecting the agreed deductions, and therefore, the contention of the petitioner is unsustainable.
5. I have heard the learned counsel for the petitioner as well as the respondents and perused the materials on record.
6. It is admitted by both parties that, even though one of the three works commenced prior to the GST regime, all the three works were completed after the introduction of the GST regime. Therefore, even going by the admission of the respondents, the tax to be levied is under the GST regime. On going through Ext.R1(b) series, it is seen that the amounts quoted along with the tender towards KVAT liability have been deducted from the contract amount, and thereafter, the GST amount has been added to the contract value. Therefore, the contention of the petitioner that there is double taxation both under the KVAT as well as under the GST is not sustainable.
7. The learned counsel for the petitioner points out that the quantification in Ext.R1(b) series is not correct and that the same has to be reworked. As far as Ext.P9 is concerned, the order which is under challenge, it is seen that Ext.P9 is only a reflection or explanation of the bills that have been generated and produced as Ext.R1(b) series. Ext.P9 specifically states that the tender was submitted by the petitioner by including the tax liability under KVAT and Service Tax. Therefore, as KVAT no longer exists, the amount so quoted has been deducted from the bill amount, and on such amount, GST @ 18% has been added to arrive at the total contract value. The explanation is in consonance with the statutory provisions. Therefore, I find no reason to interfere with Ext.P9 order passed by the respondents.
8. However, after going through Ext.R1(b) series, the learned counsel for the petitioner contends that there is a dispute pertaining to the amounts that have been calculated. As the same is a question of fact which has to be addressed before the appropriate forum, even though I sustain Ext.P9, I direct the respondents to consider the grievance of the petitioner regarding the calculation of the amounts stated in Ext.R1(b) series. Liberty is granted to the petitioner to approach the appropriate jurisdictional authorities in order to resolve the dispute, if any.
With the said direction, the Writ Petition is disposed of as above.
