Case Law Details
B S Kumar Swamy Vs State Of Karnataka (Karnataka High Court)
Karnataka High Court provided guidelines relating to applicability of tax on works executed prior to 01.07.2017 and works executed after 01.07.2017 in case of where work contract is executed between the petitioners and the State/ other Government agencies.
Facts- This writ petition is filed under article 226 of the Constitution of India, praying to declare that the provisions of GST Act is inapplicable in respect of works contract where the provisions of service are made prior to 01.07.2017.
Conclusion- Guidelines to calculate tax difference on balance work executed after 01.07.2017. Accordingly, it is directed that the payments received by the Petitioners pre-GST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime – either under COT or VAT scheme as applicable. Then, calculate the balance works to be completed or completed after 01.07.2017, in the original contract. Also, calculate ‘tax difference’ on balance works executed or to be executed after 01.07.2017, separately.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioners in all these writ petitions have sought for identical reliefs at prayers (a) and (b).
2. It is pointed out by learned Senior Counsel Sri D.R.Ravishankar appearing on behalf of the petitioners that these petitions are to be disposed off in terms of the order passed in W.P.No.9721/2019 and connected petitions disposed off on 11.04.2023. The operative portion of the said order in the aforesaid writ petitions at para-20 reads as hereunder:-
“20. In the result, I pass the following:-
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 01.07.2017) 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 07.2017 are to be assessed under KVA T tax regime – either under COT or VAT scheme as applicable.
(c) Calculate the balance works to be completed or completed after 01.07.2017, 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 01.07.2017 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 01.07.2017, 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 07.2017 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.”
3. Accordingly, these Writ Petitions are disposed off in terms of the conclusion in W.P.No.9721/2019 and connected petitions, the operative portion of which is extracted hereinabove.
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