M/S.Guru Maharaj Construction vs. State Of Odisha

Held

The Court noted that the State Government had issued revised guidelines on 10.12.2018, superseding the earlier memorandum dated 07.12.2017, to address the issue of differential tax amounts for works contracts executed after the implementation of GST. These revised guidelines provide a detailed procedure for calculating the GST-inclusive work value for the balance work, considering the original agreement rates based on the pre-revised Schedule of Rates (SoR-2014) and the revised SoR-2014. The guidelines stipulate that if the revised GST-inclusive work value for the balance work exceeds the original agreement work value for the balance work, the works contractor is to be reimbursed for the excess amount. Conversely, if it is less, the payment is to be reduced, and any excess payment already made is to be recovered. The Court directed the petitioner to make a comprehensive representation before the appropriate authority within four weeks, which the authority would consider and dispose of in light of the revised guidelines dated 10.12.2018, preferably by 31.03.2019. No coercive action was to be taken against the petitioner until 31.03.2019.

Facts

The petitioner, a works contractor, challenged the action of the opposite parties in not reimbursing the differential tax amount arising from the transition from Value Added Tax (VAT) to Goods and Services Tax (GST) on 01.07.2017. The petitioner also sought to quash Clause 1(iii) of the Finance Department Memorandum dated 07.12.2017. The grievance was that the GST liability was not envisaged when the agreements were entered into. The State submitted revised guidelines dated 10.12.2018, superseding the earlier memorandum, to address the difficulties faced by contractors regarding works contracts under GST for tenders invited before 01.07.2017 but executed partly or wholly after that date.

Key Issues

1. Whether the petitioner is entitled to reimbursement of the differential tax amount arising from the change in tax regime from VAT to GST for works contracts entered into before 01.07.2017 but executed thereafter? Petitioner's contention: The petitioner argued that the introduction of GST resulted in an increased tax burden that was not contemplated at the time of entering into the agreements, and therefore, they are entitled to reimbursement of this differential tax amount. They challenged the initial guidelines that did not adequately address this issue. Revenue/State's contention: The State submitted revised guidelines dated 10.12.2018, which provide a mechanism for determining the GST-inclusive work value for the balance work executed after 01.07.2017. These guidelines aim to address the claims of contractors for additional amounts towards GST. The State relied on the Office Memorandum No. FIN-CTI-TAX-0045-2017/38535/F dated 10.12.2018.