Vishal Verma vs. Union Of INDIA Th Its Secretary Defence New Dehli And Others

Held

The High Court held that the review petition lacked merit. Regarding the first issue, the Court noted that Special Condition 49 of the tender document was neither challenged in the original writ petition nor argued before the Court when the judgment sought to be reviewed was passed. The Court reiterated that the GST Council's decision was a recommendation, and the statutory notification was issued on 21st September, 2017. The Court found no error in its previous finding that the rate of tax on the last date of bid submission was 18%, which was subsequently reduced to 12% by the notification dated 21st September, 2017. The Court clarified that SRO-GST-11 dated 8th July, 2017, prescribed 18% GST for construction services under Heading 9954, which included composite supply of works contract. SRO-GST-02 dated 22nd August, 2017, did not alter the rate for general works contracts but only for specific types of works contracts supplied to government entities or for specific constructions like historical monuments or pipelines. The composite supply of works contract, as defined in Section 2(119) of the CGST Act, 2017, at item No. 3(ii) of the notification dated 8th July, 2017, which prescribed 18% GST, was not altered by the 22nd August, 2017 notification. The Court concluded that the rate of GST on composite supply of works was 18% at the time of bid submission, and the subsequent notification on 21st September, 2017, reduced it to 12%. Therefore, the petitioner's argument that the rate was already 12% based on the 22nd August, 2017 notification was rejected. The ratio decidendi is that recommendations of the GST Council do not alter tax rates until formal statutory notification is issued, and specific notifications must be carefully examined to determine their applicability to particular types of works contracts.

Facts

The petitioner, Vishal Verma, proprietor of M/s Kiran Constructions, sought a review of a High Court judgment that dismissed his writ petition. The original writ petition concerned the demand for differential Goods and Services Tax (GST) on works contract services. The petitioner had submitted bids after a GST Council recommendation to reduce the rate from 18% to 12%, but the formal notification was issued later. The respondents issued letters demanding the differential tax amount. The High Court had previously dismissed similar petitions, finding that the GST Council's decision was a recommendation, and the statutory notification was issued later. The petitioner argued that the work allotment occurred after the rate reduction and that a specific tender condition was contrary to GST law. He also contended that SRO-GST-06 dated 21.09.2017 did not reduce GST on works contracts, and SRO-GST-02 dated 22.08.2017 already stipulated a 12% rate.

Key Issues

1. Whether the High Court erred in not appreciating that the work allotment to the petitioner occurred after the GST rate reduction notification dated 21st September, 2017, and that a specific tender condition (Condition No. 49) was contrary to Section 13 of the CGST Act, 2017, making it liable to be ignored? The petitioner argued that Section 13 of the CGST Act, 2017, determines the time of supply for tax liability, and Special Condition 49, if part of the contract, should have been disregarded. He further contended that SRO-GST-06 dated 21.09.2017 was inapplicable, and the applicable rate for works contracts was 12% as per SRO-GST-02 dated 22nd August, 2017, meaning his bids were based on the correct rate. 2. Whether the High Court erred in not appreciating that the contract was governed by SRO-GST-02 dated 22nd August, 2017, which stipulated a 12% GST rate for composite supply of works contract, and therefore, the subsequent notification dated 21st September, 2017, was not applicable? The petitioner relied on Serial No. 3 of the 22nd August, 2017 notification, arguing that the notified rate at the time of bidding was 12% and the 21st September, 2017 notification did not alter this for works contracts. The respondents argued that all issues raised by the review petitioner had already been decided by previous judgments of the High Court in WP(C) No. 2183/2019 and WP(C) No. 170/2021, and therefore, the review petition was liable to be dismissed.