Devaki Constructions Vs Director (Madras High Court)
The Madras High Court, in the case of Devaki Constructions Vs Director, delivered a ruling clarifying that a contractor’s statutory obligation to pay Goods and Services Tax (GST) cannot be postponed or deferred due to the non-reimbursement of the tax amount by a government client. The writ petition was filed by Devaki Constructions, a registered government contractor, seeking a Writ of Mandamus to prevent the Revenue authorities from taking action against the company until the differential GST, interest, and penalty were paid by the first respondent, a state government department.
The dispute arose following the GST Council’s decision in July 2022 to revise the GST rate for works contracts supplied to Central or State Governments from 12% to 18%. Despite the mandated revision, the contractor contended that the state government department continued to remit GST to them at the old 12% rate. This left Devaki Constructions facing a demand from the tax authorities to pay the remaining 6% differential GST, totaling Rs. 4,15,69,890. The petitioner argued that without the reimbursement of this differential amount from the government department, they were unable to remit the demanded tax and sought a stay on all coercive recovery actions until the government client fulfilled its payment obligation.
