Case Law Details
Sri Chandrashekaraiah Vs State of Karnataka (Karnataka High Court)
Karnataka High Court provided directions/ guidelines for calculation of tax difference on contract value in respect of works contracts executed prior to 01.07.2017 under Karnataka Value Added Tax Act, 2003 and completed after introduction of GST i.e. after 01.07.2017
Facts- The main issue involved in these petitions arises out of the grievance of the Petitioners that in view of the introduction of GST w.e.f 01.07.2017, the Petitioners who have earlier entered into “Works Contract” and had been assessed during the pre-GST regime either under the Composition scheme (COT scheme) or regular VAT assessment scheme( for short ‘the VAT scheme’) under the Karnataka Value Added Tax Act, 2003 ( for short ‘the KVAT Act’) are required and made liable to pay additional tax by way of GST after 01.07.2017, which is a huge differential tax burden not envisaged at the time of entering into agreements under the COT/KVAT schemes during the KVAT regime and as such, petitioners are before this Court by way of these petitions.
Conclusion- The tax component is an independent component which the petitioners/works contractors do not retain as a profit and is a statutory payment to be made. Looking into the nature of payment of GST, the respondents/employers are required to honour the same after determining the differential tax burden post transition to GST, especially where “works contract” was entered into prior to 01.07.2017 during KVAT regime and works are completed pre-GST but payments are made post-GST or where Contracts were entered into prior to 01.07.2017 but partly executed pre-GST and balance work executed post-GST or Contracts for which tenders were invited during KVAT regime and finalised after 01.07.2017 under GST regime or contracts which were invited during KVAT regime under old schedule of rates (SR) but finalised under GST regime and that a certain procedure is required to be followed to determine the amount payable by or to the works contractors/petitioners.
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 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.
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If possible can u give calculation with examples