M/S Sweet Home Constructions vs. The Government Of Karnataka
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The petitioner, M/s. Sweet Home Constructions, represented by its proprietor, filed a writ petition seeking a direction to the respondents, the Government of Karnataka and the Chief Engineer, KHB, to refund the differential Goods and Services Tax (GST) amount paid for works executed. The petitioner had submitted representations dated November 21, 2024, to the Chief Engineer, KHB, seeking this refund. The core of the dispute revolves around the tax treatment of works contracts that spanned the transition from the pre-GST regime (KVAT) to the GST regime, and how payments received post-GST for work done pre-GST should be handled.
Held
The Court allowed the writ petition, holding that the issue was covered by a previous judgment of a co-ordinate bench in W.P.No.9721 of 2019 and connected cases, disposed of on 11.04.2023. This prior judgment had laid down detailed guidelines for calculating the differential tax on works contracts executed across the pre-GST (KVAT) and GST regimes. The guidelines included calculating works executed pre-GST under KVAT, assessing payments received pre-GST under the KVAT regime, calculating balance works post-GST, deriving material rates, deducting KVAT and service tax, adding applicable GST, setting off input credit, and calculating the 'tax difference'. Crucially, the prior judgment directed that if the revised GST-inclusive work value for balance work completed or to be completed post-01.07.2017 was more than the original agreement value, the employer had to pay or reimburse the differential tax amount. Similarly, if payments for works completed pre-GST were made post-GST, the employer had to pay or reimburse the differential tax. The present Court followed this precedent, directing the respondents to reimburse the GST amount as indicated in the petitioner's representation dated 21.11.2024 within six weeks.
Key Issues
1. Whether the petitioner is entitled to a refund of the differential GST amount paid for works executed, as per their representation dated 21.11.2024, in light of previous judgments of this Court concerning works contracts executed across the KVAT and GST regimes? (Question of law and fact, turning on the interpretation and application of tax laws and contractual obligations). Petitioner's contention: The petitioner argued that the issue in this lis is squarely covered by a judgment of a co-ordinate bench of this Court in W.P.No.9721 of 2019 and connected cases, disposed of on 11.04.2023. They relied on the directions issued in that judgment for calculating differential tax and reimbursement. Respondents' contention: The respondents did not record any specific arguments against the petitioner's claim in the judgment. The judgment notes that the learned Additional Government Advocate appeared for respondent No.1 and the learned counsel appeared for respondent No.2, but their specific arguments are not detailed.
Sections Cited
Section 73, Section 129, Rule 86A
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Cause title — parties, addresses and appearances
ORAL ORDER
The petitioner is before this Court seeking the following prayer: “a) Issue a writ or such other order in the nature of Mandamus directing the Respondents to refund the differential GST amount paid by the petitioner for the works executed by the petitioner, as per the representations dated 21-11-2024 given by the petitioner to Respondent 2 as per ANNEXURE-B. b) Any other relief that, the Hon’ble Courts deems it fit in the light of the facts and circumstances, in the ends of justice.”
Heard Sri Ravikiran P Pawar, learned counsel appearing for petitioner, Sri Mohammed Jaffar Shah, learned Additional NC: 2025:KHC:15041 Government Advocate appearing for respondent No.1 and Sri P V Chandrashekar, learned counsel appearing for respondent No.2. 3. Learned counsel for petitioner submits that the issue in the lis stands answered by the judgment rendered by the co-ordinate bench of this Court in W.P.No.9721 of 2019 and connected cases disposed on 11-04-2023. The coordinate bench, considering the entire spectrum of law, has passed the following order:
“20. In the result, I pass the following:-
ORDER
(i) Petitions are hereby disposed of.
(ii) The Respondents-State and other Govt agencies / Respondents who have entered into works contract with the Petitioners are issued the following directions / guidelines:-
(a) Calculate the works executed pre- GST (prior to 01.07.2017) under KVAT regime and payments received by the Petitioners.
(b) The payments received by the Petitioners pre-GST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime – either under COT or VAT scheme as applicable. NC: 2025:KHC:15041 (c) Calculate the balance works to be completed or completed after 01.07.2017, in the original contract.
(d) Derive the rate of materials, KVAT items required or used to complete the balance works.
(e) Deduct the "KVAT" amount from those materials and the service tax, if applicable.
(f) Add the applicable "GST" on those items.
(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT.
(h) Further, the “tax difference” should be calculated on such balance works executed or to be executed after 01.07.2017 separately.
(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.
(j) 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 as determined above 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; so also, in case payments for works completed pre-GST are made post- GST, the concerned employer has to pay or NC: 2025:KHC:15041 reimburse, as the case may be, the differential tax amount, to the Petitioners.
(iii) Petitioners are directed to submit comprehensive representations to the respective employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.
(iv) If such representations are submitted, the respective employers/Respondents are directed to consider and dispose of the same in the light of the aforesaid directions / guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.
(v) In view of the interim orders passed by this Court in the present petitions, such of the petitioners who had not filed their GST returns during the period after 01.07.2017 are permitted to file their returns / amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.
(vi) The GST authorities are also directed not to take precipitative action against the Petitioners for a period of 6 months from the date of receipt of a copy of this order.
(vii) Liberty is reserved in favour of the petitioners to challenge any order / decision passed / taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law.”
The afore-quoted judgment is followed by this Court in W.P.No.107489 of 2024 disposed on 19-02-2025. In view NC: 2025:KHC:15041 of the judgments as quoted supra, this petition also deserves to succeed. Hence, the following:
ORDER
(i) The Writ Petition is allowed.
(ii) The respondents are hereby directed to reimburse the GST amount, as indicated in the representation dated 21-11-2024, within a period of six weeks from the date of receipt of the copy of this order. (M.NAGAPRASANNA) JUDGE
BKP List No.: 1 Sl No.: 113
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.