2026-VIL-689-MAD
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SGST High Court Cases

GST - Reimbursement of tax on account of change in tax regime – Petitioners were awarded contracts for construction work when the tax regime was governed by the VAT Act and Finance Act - During the execution of the contract, the GST enactments were implemented; Petitioners sought reimbursement of the increased tax component based on the General Conditions of Contract and Government Orders, which Respondent rejected - Whether the Petitioners are entitled to reimbursement of the additional tax burden arising from the change in the tax regime during the subsistence of the contract – HELD - As per the relevant clause of the General Conditions of Contract, the project manager shall adjust the contract price if taxes, duties, and other levies are changed between the date 28 days before the submission of bids and the date of the last completion certificate. The change in the tax regime from the VAT to GST law entitles the Petitioners to reimbursement in terms of the principle akin to Section 64A of the Sale of Goods Act. The relevant Government Order also states that the entire tax of the supply will have to be finally borne by the purchaser; since the tax regime changed post-award, the amount of tax due to the change has to be reimbursed as it was not reflected in the contract price. Accordingly, Respondent is directed to refund the tax component - Refund of retention amounts and impact of audit objections - Petitioners completed the works under the respective contracts and sought the return of the retention amounts; Respondent rejected the request for refund on the ground that retention amounts could not be released due to pending audit objections related to the work packages - Whether the pendency of audit objections is a valid ground for Respondent to withhold the refund of retention amounts – HELD - The retention amounts are to be refunded back unless there are reasons for appropriating the same on account of the works executed by the Petitioners under the contract; merely because audit objections were raised by the Audit General would not be a ground for not processing the amount claimed by the Petitioners for refund of the retention amounts. The existence of audit objections does not justify the withholding of amounts due for work already executed; accordingly, Respondent is directed to refund the retention amounts with interest at commercial rate.
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