2026-VIL-605-KAR
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SGST High Court Cases

GST - Works contracts - Retroactive application and waiver of statutory provisions – Respondents-Contractors having entered into works contracts with government agencies and departments prior to 01.07.2017 claimed that the rates quoted by them were inclusive of all taxes applicable at that time and did not include the element of GST. When the GST regime came into force on 01.07.2017, the works contracts became subject to GST at 18% and subsequently 12%, thereby increasing the tax burden of the contractors - Authorities issued notices demanding GST payment. The writ petitions filed by the contractors were allowed by the Single Judge, who issued directions to the employers to reimburse the differential tax and to the GST authorities to waive interest, penalty, and limitation periods for filing amended returns - Whether directions issued by the trial court permitting contractors to file returns by calculating differential tax and directing tax authorities to waive interest, penalty, and limitation periods under the GST Acts are sustainable and whether the burden of incremental tax arising from the change in tax regime can be shifted to the employers through judicial directions to tax authorities – HELD - The controversy regarding incremental tax burden arising from the change in tax regime is essentially a matter between the contractors and the employers with whom they had entered into contracts, and not a matter for judicial intervention with respect to the statutory scheme for levy and collection of GST. The liability of contractors to pay GST is required to be determined strictly in accordance with the provisions of the relevant GST statutes. The levy of interest under the GST Acts is automatic and mandatory and admits of no discretion to waive or reduce it through judicial directions. No directions can be issued permitting the filing of revised returns contrary to the statutory provisions of the GST Acts, and plenary directions to waive penalty, interest, or the limitation for filing returns cannot be sustained as they are contrary to the statutory scheme - The dispute regarding differential tax reimbursement must be resolved between the contractors and employers through contractual remedies, and not through directions to tax authorities. The courts cannot issue directions to tax authorities regarding levy, assessment, and collection of tax, penalty, or interest in a private contractual dispute between contractors and employers. Judicial power cannot be exercised to override or modify the statutory scheme governing tax liability, which is a matter of statutory prescription - The impugned order, to the extent it issues directions to the tax authorities, stands set aside. The appeals are disposed of on the basis that directions to reimburse differential tax are construed as applicable only to the concerned employers and not to the tax authorities – The appeal is disposed of
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