Siddalingayya S/o Gadigeyya Hiremath Vs Commercial Tax Officer (Karnataka High Court)
Summary: The Karnataka High Court, Dharwad Bench, considered a writ petition filed by Siddalingayya S/o Gadigeyya Hiremath, a civil contractor, concerning the additional Goods and Services Tax burden arising on works contracts executed during the transition from the Karnataka Value Added Tax regime to GST. The petitioner sought reimbursement of the differential tax attributable to the change from VAT to GST rates of 12% or 18% from the government departments for which he had executed works. He also challenged an adjudication order dated 25 January 2024 for FY 2018-19 under Section 73(9) and a garnishee notice dated 6 February 2026. The petition additionally sought declarations concerning Section 7(3) read with Clause 6 of Schedule II of the GST Act, along with directions for a State policy addressing the differential tax burden on works contracts.
The Court found that the controversy was governed by earlier decisions of the Karnataka High Court, particularly Sri Chandrashekaraiah Vs State of Karnataka, decided on 11 April 2023, and the subsequent Division Bench judgment dated 10 June 2026 in W.A. No. 1587/2023 and connected appeals. The original Single Judge directions contemplated identifying works executed before 1 July 2017, calculating the applicable VAT and GST components, accounting for input tax credit, determining the differential tax on the remaining works, and considering supplementary agreements and reimbursement by the concerned government employers.
The Division Bench, however, clarified that disputes regarding reimbursement of incremental GST are matters between contractors and their employers and do not alter the statutory framework governing the levy, assessment, recovery or enforcement of GST. Consequently, directions requiring tax authorities to permit revised returns contrary to statutory provisions, waive interest or penalties, or disregard statutory limitation periods were unsustainable. The Division Bench also clarified that reimbursement directions could operate only against the concerned employers and not against GST authorities. The Court further referred to its subsequent decision in W.P. No. 100867/2026, which applied the surviving directions of the earlier judgment while reserving liberty to challenge assessment orders through appropriate proceedings.
Applying these precedents, the High Court disposed of the present writ petition in terms of the Division Bench judgment in W.A. No. 1587/2023 and the Coordinate Bench order in W.P. No. 100867/2026. The decision preserves the distinction between a contractor’s claim for reimbursement from the employer and the contractor’s independent statutory obligations under GST law. The Court did not independently quantify any reimbursement or expressly quash the challenged assessment order and garnishee notice in its operative paragraph.
List of Cases Discussed
1. Sri Chandrashekaraiah Vs State of Karnataka (Karnataka High Court); W.P. No. 9721/2019 and connected petitions, including W.P. No. 19067/2019; 11/04/2023. The Coordinate Bench formulated directions for calculating differential tax arising from the transition from KVAT to GST on government works contracts, including possible reimbursement by employers.
2. Office of Principal Commissioner GST and Central Excise & Others Vs R Chandrashekhar S/o Ramaiah (Karnataka High Court, Division Bench); W.A. No. 1587/2023 and connected appeals; 10/06/2026; NC:2026:KHC:28975-DB. Followed. The Division Bench held that reimbursement of incremental GST is a contractual dispute between the contractor and employer, without prejudice to the statutory powers of tax authorities. It set aside directions concerning revised returns, waiver of statutory interest and penalties, and directions to tax authorities regarding reimbursement.
3. W.P. No. 100867/2026 and connected matter (Karnataka High Court). Followed. The Coordinate Bench applied the surviving directions in Chandrashekaraiah after the Division Bench modifications, while preserving the petitioners’ remedies against assessment orders.
4. W.P. No. 102511/2026 (Karnataka High Court); date recorded in the present judgment as 25/09/2023. Relied upon as the immediately preceding order covering the same controversy. The present judgment reproduces its reasoning and directions. The proceeding number and date are reproduced as printed in the source.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
Heard, Sri.H.R.Kambiyavar, learned counsel appearing for the petitioner, Smt.Girija Hiremath, learned HCGP and Sri.Venkatesh M. Kharvi, learned DSGI.
2. This Writ Petition is filed by the petitioner seeking the following reliefs:
“WHEREFORE, the Petitioner most humbly pray that this Hon’ble Court be pleased to:
(a) Declare that the provisions of Section 7 (3) read with clause 6 of Schedule II of the GST Act is ultra-vires Article 366 (12A), (26A) (29A) (b) & (f) of the Constitution in view of and settled principles of law laid down by the Hon’ble Supreme Court regarding “works contract”.
(b) Issue a writ or such other order in the nature of Mandamus directing the Respondent No.3 and 4 to consider the representations and reimburse the differential GST amount (being the difference between GST rate 12% or 18% and VAT rate) paid by the Petitioner without collecting it from Respondent No.3 and 4 for each of the works executed by the Petitioner, as per the sample work orders/representation dtd: 14/05/2018 and 12/06/2018 are produced at Annexures-C and C1 respectively and many more representations which have not been produced in this Writ Petition and for the works executed till today, in the Petitioner’s case.
(c) Issue a writ or such other order directing the Respondent No.5 – State Government to issue a circular/policy to address the issue of payment of GST on works contract which are executed under VAT regime or subsequent to introduction of GST but bills are raised after introduction of GST wherein, GST is not paid by the Respondents No.3 and 4 but is levied and paid by the Petitioner to the GST department till today.
(d) Declare that, GST being an Indirect tax is based on this concept of collect and pay, and the liability to pay is on the taxable person after collecting it from recipient of goods or services i.e., from the employer of works contract (Respondent No. 3 and 4 to pay / refund / reimburse the tax amounts to the Petitioner who has already paid GST without collecting it from Respondents No.3 and 4 for contracts executed till today.
(e) Issue Writ of Certiorari or in the like nature of Certiorari quashing the impugned order bearing No.ACCT/LGSTO-310/ORDER-73/50/2023-24 dtd: 25/01/2024 for the tax period F.Y. 2018-19, under Section 73 (9) of the Act, passed by Respondent No.2 vide Annexure-E, to the petition.
(f) Issue Writ of Certiorari or in the like nature of Certiorari quashing the impugned garnishee notice dtd: 06/02/2026 issued by the Respondent No.2 to a third person, (i.e., to the Bank manager, At: Haliyal) vide Annexure-F, to the petition.
(g) Pass such other orders as may be deemed appropriate under the circumstances of the case, in the ends of justice.”
3. The issue involved in this Writ Petition is squarely covered by the order dated 25.09.2023 passed in W.P.No.102511/2026. The relevant portions of the order passed in W.P.No.102511/2026 at paragraph Nos.2 to end read as under:
2. “Heard, Smt.Veena Hegde, learned counsel appearing for the petitioner; Smt.Nandini Somapur, learned AGA appearing for respondent Nos.2 to 11 and 17; Sri.Girish Hulmani, learned counsel appearing for respondent Nos.1 and 20; Sri. S.K. Kayakamath learned counsel appearing for Respondent 13; Sri.Akshaya B.M. and Sri.Shivakumar Gowda, learned counsel appearing for respondent No.14; Sri.G.I.Gacchhinmath, learned counsel appearing for Respondent No.15; Sri.V.Shivaraj Hiremath, learned counsel appearing for Respondent No.16; Sri. K.L.Patil learned counsel for Respondent No.19 and Sri.P.R.Bentur, learned counsel appearing for respondent No.21.
3. The lis involved in this petition is no more res integra in view of the judgment passed by the Coordinate Bench of this Court in W.P.No.19067/2019 and other connected matters dated 11.04.2023.
4. Subsequently, in the appeal by the Revenue Authorities in Writ Appeal in W.A.No.1587/2023 and other connected matters, the Hon’ble Division Bench of this Court on 10.06.2026 modified the order passed by the learned Single Judge in terms of Paragraph Nos.8, 9, 10, 11 and 12. The said Paragraphs read as under:
“8. The dispute as to whether the writ petitioners would be entitled to reimbursement of the incremental tax paid or payable by them on account of the levy of GST is strictly a matter between the writ petitioners and the Employers with whom they had entered into the contracts. The contracts between the writ petitioners and the Employers would not alter the statutory scheme for the levy of GST. Thus, the liability of the writ petitioners to pay Goods and Services Tax (whether under the Central Goods and Services Tax Act, 2017, the State Goods and Services Tax Act, 2017 or the Integrated Goods and Services Tax Act, 2017) is required to be determined strictly in accordance with the provisions of the relevant statute. The question of the levy of GST, assessment, recovery, and enforcement is a matter of statutory prescription.
9. In view of the above, no directions could be issued permitting the filing of any revised returns contrary to the provisions of the statute. The plenary directions to waive the penalty, interest under the GST Acts or the limitation for filing returns/revised returns are also unsustainable.
10. The controversy as to the incremental tax burden arising on account of the change in the tax regime is, in essence, one between the writ petitioners and the Employers. In the context of such a dispute, no directions could be issued to the tax authorities regarding the levy, assessment, and collection of tax, penalty, or interest.
11. In the aforesaid view, the direction issued to the respondents to reimburse the differential tax is required to be construed as a direction only to the concerned Employers and not to the tax authorities.
12. Accordingly, the impugned order, to the extent it issues directions to the tax authorities, is set aside. The appeal is disposed of in the aforesaid terms.”
5. Thereafter, in subsequent Writ Petition, the Coordinate Bench of this Court in W.P.No.100867/2026 and connected matter passed the order at Paragraph Nos.3 to 7, which read thus:
“3. It is jointly submitted by the learned counsel for the petitioner and the learned AGA that the question that arises for consideration in the present writ petitions is with regard to the adjustment of Goods and Service Tax [GST] consequent to coming into force of the Central Goods and Service Taxes Act, 2017 [CGST Act]. It is further submitted that a Co-ordinate Bench of this Court in the case of Chandrashekharaiah Vs. State of Karnataka1 has disposed of the writ petitions by issuing various guidelines. The operative portion of the said order is as under:
“ORDER
(i) Petitions are hereby disposed of.
(ii) The Respondents-State and other Govt agencies/Respondents who have entered into works contract with the Petitioners are issued the following directions/guidelines:-
(a) Calculate the works executed pre-GST (prior to 1-7-2017) under KVAT regime and payments received by the Petitioners.
(b) The payments received by the Petitioners pre-GST for such of the works executed before 1-7-2017 are to be assessed under KVAT tax regime – either under COT or VAT scheme as applicable.
(c) Calculate the balance works to be completed or completed after 1-7-2017, in the original contract.
(d) Derive the rate of materials, KVAT items required or used to complete the balance works.
(e) Deduct the “KVAT” amount from those materials and the service tax, if applicable.
(f) Add the applicable “GST” on those items.
(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT.
(h) Further, the “tax difference” should be calculated on such balance works executed or to be executed after 1-7-2017 separately.
(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.
(j) A supplementary agreement may be signed with the Petitioners for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 1-7-2017, is more than the original agreement work value, the Petitioners are to be paid/reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioners.
(iii) Petitioners are directed to submit comprehensive representations to the respective employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.
(iv) If such representations are submitted, the respective employers/Respondents are directed to consider and dispose of the same in the light of the aforesaid directions/guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.
(v) In view of the interim orders passed by this Court in the present petitions, such of the petitioners who had not filed their GST returns during the period after 1-7-2017 are permitted to file their returns/amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.
(vi) The GST authorities are also directed not to take precipitative action against the Petitioners for a period of 6 months from the date of receipt of a copy of this order.
(vii) Liberty is reserved in favour of the petitioners to challenge any order/decision passed/taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law.”
4. It is further jointly submitted that the judgment of the Co-ordinate Bench of the Court in the case of Chandrasekharaiah1 was the subject matter of challenge before the Division Bench of this Court in the case of Office of Principal Commissioner GST and Central Excise and others Vs R Chandrashekhar S/o. Ramaiah2. The Division Bench has partly allowed the said appeals. The operative portion of the order of the Division Bench is as under:
“8. The dispute as to whether the writ petitioners would be entitled to reimbursement of the incremental tax paid or payable by them on account of the levy of GST is strictly a matter between the writ petitioners and the Employers with whom they had entered into the contracts. The contracts between the writ petitioners and the Employers would not alter the statutory scheme for the levy of GST. Thus, the liability of the writ petitioners to pay Goods and Services Tax (whether under the Central Goods and Services Tax Act, 2017, the State Goods and Services Tax Act, 2017 or the Integrated Goods and Services Tax Act, 2017) is required to be determined strictly in accordance with the provisions of the relevant statute. The question of the levy of GST, assessment, recovery, and enforcement is a matter of statutory prescription.
9. In view of the above, no directions could be issued permitting the filing of any revised returns contrary to the provisions of the statute. The plenary directions to waive the penalty, interest under the GST Acts or the limitation for filing returns/revised returns are also unsustainable.
10. The controversy as to the incremental tax burden arising on account of the change in the tax regime is, in essence, one between the writ petitioners and the Employers. In the context of such a dispute, no directions could be issued to the tax authorities regarding the levy, assessment, and collection of tax, penalty, or interest.
11. In the aforesaid view, the direction issued to the respondents to reimburse the differential tax is required to be construed as a direction only to the concerned Employers and not to the tax authorities.
12. Accordingly, the impugned order, to the extent it issues directions to the tax authorities, is set aside. The appeal is disposed of in the aforesaid terms.”
5. In view of the judgment of the Division Bench, as referred above, the operative direction Nos.(v) and (vi) as ordered in case of Chandrashekharaiah1 have been set aside.
6. In view of the aforementioned, the present writ petitions are allowed in terms of the operative direction Nos.(i), (ii)(a) to (ii)(f), (iii), (iv) and (vii) as held in the case of Chandrashekharaiah1 as noted above.
7. Since the petitioner has also impugned the assessment orders in the present writ petitions, the petitioner is at liberty to assail the same in appropriate proceedings. The concerned authorities shall not take into account time period spent by the petitioner in prosecuting the present petitions.’’
6. In view thereof, the Writ Petition stands disposed of as per the order passed by the Hon’ble Division Bench in W.A.No.1587/2023 as well as the Coordinate Bench of this Court in W.P.No.100867/2026.
4. In view thereof, the Writ Petition stands disposed of, as per the judgment passed by the Hon’ble Division Bench of this Court in W.A.No.1587/2023 as well as the Coordinate Bench of this Court in W.P.No.100867/2026.
Notes:
1 Order dated 11.04.2023 in W.P.No.9721/2019
2 Judgment dated 10.06.2026 in W.P.No.1587/2023 C/w W.A.No.1599/2023, W.A.No.1638/2023, W.A.No.1647/2023 & W.A.No.25/2024 : NC:2026 KHC:28975-DB
