Karnataka Residential Educational Institutions Society Vs Sweet Home Constructions (Karnataka High Court)
Summary: The Karnataka High Court at Bengaluru, comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha, allowed Writ Appeal No. 2005 of 2025 filed by the Karnataka Residential Educational Institutions Society and set aside the order of the learned Single Judge directing reimbursement of differential GST to the contractor. The judgment was delivered on 11 August 2026.
The dispute arose from a construction contract for the BC Post Metric Girls Engineering Hostel at Karwar, Uttara Kannada District. The Karnataka Residential Educational Institutions Society had invited tenders on 25.10.2017. M/s Sweet Home Constructions submitted its tender on 08.12.2017 and was declared the successful bidder. The parties subsequently executed the contract agreement on 28.02.2018.
The contract price was Rs.3,17,41,000/- (+1.48% above the Schedule of Rates 2016-17). The contractor subsequently raised bills aggregating Rs.3,19,97,005/- and stated that it had discharged GST at 12% and 18%, amounting to Rs.38,79,278/-. According to the contractor, the estimate had made provision for tax at 4%, amounting to Rs.12,99,699/-. It therefore claimed reimbursement of the differential amount of Rs.25,99,398/- along with interest.
The learned Single Judge had allowed the writ petition by relying upon the Karnataka High Court’s earlier decision in Sri Chandrashekaraiah and Others v. State of Karnataka and Others, W.P.No.9721/2019 and connected cases, decided on 11.04.2023, as followed in W.P.No.107489/2024 decided on 19.02.2025. The Single Judge directed the appellant and the State Government to reimburse the GST amount claimed in the contractor’s representation dated 21.11.2024 within six weeks.
The Division Bench, however, found that the factual basis of the Chandrashekaraiah decision had no relevance to the present case. It specifically noted that no part of the work in the present case had been executed before the introduction of GST on 01.07.2017.
The High Court held that the question whether the contractor was entitled to reimbursement of GST paid by it was essentially a contractual dispute between the contractor and the employer. The impugned order did not demonstrate that the contractual dispute had been examined or adjudicated.
The Court therefore held that it was not appropriate to examine such a contractual dispute in proceedings under Article 226 of the Constitution of India.
The Bench also considered reliance placed upon its earlier decision dated 10.06.2026 in W.A.No.718/2025 (T-RES). It clarified that the earlier decision was rendered in a different context, where the tax authorities had challenged directions requiring reimbursement of GST. The Court had then clarified that such reimbursement was to be construed as a direction to the concerned employer rather than the tax authorities.
According to the Division Bench, W.A.No.718/2025 did not prevent the concerned employer from challenging the order directing reimbursement. Rather, that decision itself recognised that the question whether a contractor is entitled to reimbursement of incremental tax arising from GST is strictly a matter between the contractor and the concerned employer under their contract.
Accordingly, the Division Bench allowed the writ appeal and set aside the Single Judge’s order. However, it clarified that the parties remained free to pursue any substantive remedies available to them in accordance with law.
Key Takeaway: The Karnataka High Court has distinguished a contractual claim for reimbursement of additional GST from a public-law dispute warranting exercise of writ jurisdiction. Where a contractor seeks reimbursement of incremental GST from its contractual employer, the entitlement ordinarily involves interpretation and enforcement of the contract and cannot simply be determined in a proceeding under Article 226.
Important Observations
1. GST reimbursement claim arose from the contract
The Court found that the contractor’s claim for reimbursement of the differential GST was fundamentally contractual. The contractor had entered into the agreement with the appellant on 28.02.2018, after the GST regime had already commenced on 01.07.2017. Therefore, the case could not be treated as one involving a contract executed under the pre-GST regime where subsequent tax changes altered the contractual position.
2. No work was executed before GST implementation
The Division Bench specifically observed that no part of the work had been executed before 01.07.2017. This factual distinction was crucial because the Single Judge had relied upon Chandrashekaraiah, whereas the Division Bench found that the factual circumstances underlying that decision did not apply to the present dispute.
3. Article 226 not appropriate for adjudicating contractual disputes
The Court reiterated that contractual disputes involving entitlement to payment or reimbursement should not ordinarily be examined in writ proceedings merely because one of the contracting parties is a government body. The Court observed that the impugned order did not indicate that the contractual dispute had been examined or adjudicated.
4. Contractor versus employer
The Court clarified that the question of reimbursement of incremental GST is a matter between the contractor and the concerned employer with whom the contract was entered into. The existence of a government entity as the employer does not, by itself, convert the contractual claim into a matter appropriate for adjudication under Article 226.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. For the reasons stated in the application – I.A.1/2025, the same is allowed. The delay of 230 days in filing the above appeal is condoned.
2. The appellant has filed the present appeal impugning the order dated 26.03.2025 [hereafter ‘the impugned order’] passed by the learned Single Judge in W.P.No.35531/2024 (GM-TEN), whereby the said petition was allowed. Respondent No.1 herein [hereafter ‘the writ petitioner’] had filed the said petition praying as under:
“a) Issue a writ or such other order in the nature of Mandamus directing the Respondents to refund the differential GST amount paid by the Petitioners for the works executed by each of the Petitioners respectively, as per the representations dated 21-11-2024 given by the Petitioners-Contractors to Respondent 2 as per ANNEXURE-B.
b) Any other relief that, the Hon’ble Courts deems it fit in the light of the facts and circumstances, in the ends of justice.”
3. The learned Single Judge, without adverting to the facts, allowed the said petition by relying on the decision rendered in W.P.No.9721/2019 and other connected cases (Sri Chandrashekaraiah and Others v. State of Karnataka and Others), decided on 11.04.2023, as followed in W.P.No.107489/2024 decided on 19.02.2025.
4. By the impugned order, the learned Single Judge has directed the appellant as well as respondent No.2 herein to reimburse the Goods and Services Tax (GST) amount as claimed in the representation dated 21.11.2024, within a period of six weeks.
The said representation, which has been placed on record, indicates that the writ petitioner had raised various bills aggregating Rs.3,19,97,005/- in respect of the construction of BC Post Metric Girls Engineering Hostel at Karwar, Uttara Kannada District, under a contract agreement dated 28.02.2018. It is stated therein that the writ petitioner had discharged GST at the rates of 12% and 18% aggregating Rs.38,79,278/-, whereas the estimate for the said work, having been framed on the basis of the Schedule of Rates 2016-17, made provision for tax at the rate of 4% amounting to Rs.12,99,699/- only.
On that basis, the writ petitioner claimed reimbursement of the differential amount of Rs.25,99,398/- along with interest. The writ petitioner stated that since the contract was executed after 01.07.2017, on which date the GST regime was rolled out, it was entitled to reimbursement of the said amount.
5. The brief facts are that the appellant had invited tenders on 25.10.2017 for execution of the aforesaid works. The writ petitioner submitted its tender on 08.12.2017. The same was evaluated and the writ petitioner was declared the successful bidder. Thereafter, the parties entered into an agreement dated 28.02.2018.
The said agreement indicates that the appellant had accepted the writ petitioner’s bid for execution and completion of the works and rectifying all defects within the defect liability period at “a contract price of Rs.3,17,41,000/- (Rupees Three Crore Seventeen Lakhs Forty One Thousand Only) (+1.48% Above the SR 2016-17)”.
6. It is apparent from the above that no part of the work was executed prior to the rollout of the GST regime, that is, prior to 01.07.2017. We are unable to accept that the directions issued in the case of Chandrashekaraiah (supra) — which is the sole basis on which the writ petition was allowed — would have any relevance in the given facts.
It is also clear that any dispute, whether the writ petitioner is entitled to the reimbursement of GST paid by it or not, is a contractual dispute. The impugned order also does not indicate that any such dispute was examined or adjudicated.
7. Clearly, it is not apposite to examine such disputes in proceedings under Article 226 of the Constitution of India.
8. The learned counsel for respondent No.1 has also referred to the decision of this Court dated 10.06.2026 in W.A.No.718/2025 (T-RES), which arose out of the order dated 25.04.2024 passed by the learned Single Judge in W.P.No.2911/2024 clubbed with W.P.No.3196/2024.
He submits that the said appeal was disposed of by setting aside the order impugned therein — which had been passed in terms similar to the impugned order — albeit only to the limited extent of clarifying that the directions contained therein (which were similar to the directions issued in Chandrashekaraiah (supra)) be construed only as directions to the employer and not to the tax authorities. He submits that, therefore, the direction to the employer (which in this case is the appellant) was confirmed.
9. The said contention is not merited. W.A.No.718/2025 was preferred by the tax authorities, claiming that the directions issued were contrary to the relevant statutes. They claimed that no directions to refund or reimburse GST could be issued contrary to the Central Goods and Service Tax Act, 2017 or the State Goods and Service Tax Act, 2017.
It is in that context that this Court set aside the order impugned therein to the extent of the directions issued to the tax authorities/State, clarifying that the direction to reimburse the tax was required to be construed as a direction only to the concerned employer.
10. The order passed in W.A.No.718/2025 did not, therefore, in any manner preclude the concerned employer from assailing the order impugned in the said appeal. On the contrary, this Court had observed therein that the question whether a contractor is entitled to reimbursement of the incremental tax paid or payable on account of the levy of GST is strictly a matter between the contractor and the concerned employer with whom it has entered into a contract.
11. Accordingly, the appeal is allowed. The impugned order is set aside. We, however, clarify that this would not preclude the parties from availing such substantive remedies as may be available to them in accordance with law.
12. Pending application stands disposed of.
Notes:
1 NC:2023:KHC:15431
