GST liability to be discharged individually in each state for works contract executed in two states

L and T Pes JV Vs Assistant commissioner of state Tax and Other (Telangana High Court)

Telangana High Court held that nature of supply of works contract executed in two states is intra-state, accordingly, tax liability shall be discharged individually in each state to the extent of proportion of works executed.

Facts- The petitioner is an unincorporated Joint Venture (JV), comprising of two partners viz., Larsen & Toubro Ltd (L&T) and PES Private Limited. The petitioner has received a contract from respondent No.5 – State of Telangana, for construction of Medigadda Irrigation Barrage at Kaleshwaram, State of Telangana. The project is sponsored by the State of Telangana, but the execution of contract is spread between the States of Telangana and also Maharashtra.

Petitioner being a separate legal entity has obtained GST registration under both the Acts in the State of Maharashtra and the State of Telangana. Since the project is spread across two States, the tax liability has to be discharged to the extent of work executed in both the States u/S.12(3) of IGST.

The petitioner raised bills on respondent No.4 based on the works executed from time to time, TDS @ 2% on the total value of the bills were recovered by respondent No.4 for the value of works executed in the State of Telangana and Maharashtra. However, remittance of tax deducted, was made entirely to the State of Telangana. Consequently, the TDS deducted and remitted was lying in the electronic cash ledger of the petitioner in the GST portal in excess of the tax liability in the State of Telangana. The petitioner has discharged the tax liability in State of Maharashtra independently.