Case Law Details
Subaya Constructions Company Ltd. Vs Tamil Nadu Water Supply and Drainage Board (Madras High Court)
The Hon’ble High Court of Madras (Madurai Bench) held in Subaya Constructions Company Ltd. Vs. Tamil Nadu Water Supply & Drainage Board (W.P.(MD) No. 15967 of 2020 dated: 08.03.2021), that in case of a works contractor who entered in to the contract before the introduction of GST, he is liable to pay tax applicable to the previous VAT regime only but the differential tax liability (GST) has to be borne by the awarder. This situation arises wherein the rate of GST is higher than that of the rate of tax under the previous VAT regime.
Facts of the Case
♦ The petitioner herein entered into a contract with Tamil Nadu Water Supply And Drainage Board (TWAD Board) for laying Underground Sewerage works for Karaikudi Municipality, Sivagangai District. An agreement was entered into between them on 25.01.2016. The contract agreement reveals that quotation given by the petitioner was inclusive of TNVAT and Excise Duty components. As per Clause 46 of the Contract, deduction at source towards sales tax shall be made at 2% for civil works contract and at 5% for all other works contract as per the provisions of the Tamil Nadu Value Added Tax Act prevailed up to 30.06.2017. With effect from 01.07.2017, GST Regime came into force. The distinction between civil works and other works became irrelevant since all the works contract for construction activities came to be taxed at 12%. Since the tax regime had undergone a change, it became necessary to re-work the terms of the contract.
♦ While so, the Government of Tamil Nadu had considered the prevalent situation and issued G.O.Ms.No.296 Finance (Salaries) Department, dated: 09.10.2017. The Government took note of the fact that the price bid to be quoted should be inclusive of taxes and duties. The supplier, while raising bills and tax invoice post-GST, will now have to collect GST from the purchaser at revised rates of notified percentage of value of supply and remit the same to the respective Government. The entire GST on the supply will have to be finally borne by the purchaser/awarder.
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