Naganath Constructions Engineers And Contractors Vs Government of Karnataka (Karnataka High Court)
Summary: The Karnataka High Court considered a writ petition filed by a Class-I Registered Civil Contractor seeking a mandamus directing the respondents to reimburse differential Goods and Services Tax (GST) of Rs.1,50,935.68/- with interest at the rate of 18% per annum from the date of remittance till realization, pursuant to representation dated 25.06.2026.
The petitioner had been entrusted with the works contract of rectification of road surface, recerpetting and improvements of Kuchegar Kodar Road from KM 0.00 to 2.00 in Karwar Taluka, Uttara Kannada District. According to the petitioner, during the currency of the contract, the GST regime came into force with effect from 01.07.2017, replacing the earlier Value Added Tax (VAT) regime. The petitioner contended that, consequent upon introduction of GST, it was required to bear additional tax liability and therefore sought reimbursement of the differential tax amount from the State respondents.
The Court noted that the controversy concerning liability to bear differential tax consequent upon introduction of GST was no longer res integra. It referred to its decision in W.P.No.104908/2023, disposed of on 29.08.2023, in which the Court had held that the recipient of the works contract service was liable to bear the differential tax liability arising on account of introduction of GST and that the State, its instrumentalities and Departments were under an obligation to reimburse the differential GST amount payable by the contractor.
In the present case, the petitioner had already discharged the differential GST liability before the competent authority. Alleging inaction by the respondents in reimbursing the amount, the petitioner instituted the writ petition. The Court observed that, in view of the consistent line of decisions rendered by it on the issue, the petitioner had acquired a corresponding legal right to seek reimbursement of the differential GST amount.
The Court further observed that the respondents, being beneficiaries of the work executed by the petitioner and in view of the law laid down by the Court, were under a bounden duty to reimburse the differential GST amount. The Court therefore held that the petitioner had made out a case for issuance of a writ of mandamus.
The writ petition was accordingly allowed. The respondents were directed to consider the representation dated 25.06.2026 (Annexure–A) and determine the differential GST amount payable to the petitioner in accordance with law. Upon determination, the respondents were directed to reimburse the differential GST amount within six weeks from the date of receipt of a certified copy of the order. The Court clarified that reimbursement would be confined only to the differential tax liability attributable to introduction of the GST regime and would remain subject to verification of records and calculations in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. The petitioner is seeking mandamus directing the respondents to reimburse the differential Goods and Services Tax (for short ‘GST’) amount of Rs.1,50,935.68/- with interest at the rate of 18% per annum from the date of remittance till realization in terms of representation dated 25.06.2026 as per Annexure-A.
2. Heard learned counsel for the petitioner and learned HCGP appearing for respondents-State. Perused the records.
3. The petitioner, a Class-I Registered Civil Contractor, was entrusted with the work of rectification of road surface, recerpetting and improvements of Kuchegar Kodar Road from KM 0.00 to 2.00 in Karwar Taluka, Uttara Kannada District. It is the specific case of the petitioner that during the currency of the contract, the Goods and Services Tax (GST) regime cameinto force with effect from 01.07.2017, replacing the earlier Value Added Tax (VAT) regime. Consequent upon such introduction of GST, the petitioner was required to bear additional tax liability and, therefore, claims reimbursement of the differential tax amount from the respondents-State.
4. The controversy relating to liability to bear the differential tax consequent upon introduction of GST is no longer res integra. In an identical matter in W.P.No.104908/2023, disposed of on 29.08.2023, this Court has held that the recipient of the works contract service is liable to bear the differential tax liability arising on account of introduction of GST. This Court has further held that the State, its instrumentalities and Departments are under an obligation to reimburse the differential GST amount payable by the contractor.
5. In the present case, the petitioner has already discharged the differential GST liability before the competent authority. Alleging inaction on the part of the respondents in reimbursing the said amount, the present writ petition is instituted. In view of the consistent line of decisions rendered by this Court on the issue, the petitioner has acquired a corresponding legal right to seek reimbursement of the differential GST amount. The respondents, being beneficiaries of the work executed by the petitioner and in view of the law laid down by this Court, are under a bounden duty to reimburse the differential GST amount. Therefore, this Court is of the view that the petitioner has made out a case for issuance of a writ of mandamus.
6. For the foregoing reasons, this Court proceeds to pass the following:
ORDER
(i) The writ petition is allowed.
(ii) The respondents are directed to consider the representation dated 25.06.2026 (Annexure–A) and determine the differential GST amount payable to the petitioner in accordance with law.
(iii) Upon such determination, the respondents shall reimburse the differential GST amount to the petitioner within a period of six weeks from the date of receipt of a certified copy of this order.
(iv) It is made clear that the reimbursement shall be confined only to the differential tax liability attributable to the introduction of the GST regime and shall be subject to verification of records and calculations in accordance with law.
