Kushan Choudhury vs. The State Of Assam And 3 Ors.

Held

The Court held that the tax liability of the petitioner needs to be determined by the Commissioner of Taxes, Assam. The Court acknowledged the respondents' clarification that under GST law, tax liability arises on the supply of goods and services. If a contract was executed before July 1, 2017, but the supply was made or an invoice was raised on or after July 1, 2017, and payment was received thereafter, the GST regime would apply. The Court referred to Circular No. 3/2017-GST dated 24.08.2017 as the basis for determining the exact tax liability. The matter was remanded to the Commissioner of Taxes to decide the petitioner's tax liability based on this circular, allowing the petitioner to deposit the determined tax amount. The Court also stated that the petitioner would be at liberty to approach the appropriate forum if aggrieved by the determination.

Facts

The petitioner, Kushan Choudhury, a registered contractor, executed works contracts for the construction of Anganwadi Centres between 2015-2016. The tender notice specified that the rates were inclusive of all taxes, including VAT. Payments for these completed works were received on 21.11.2017 and 27.11.2019, after the Goods and Services Tax (GST) regime came into effect on 01.07.2017. The petitioner contended that since the works were executed during the VAT regime, the tax liability should be 5% VAT. He sought clarification from the Commissioner of Taxes, Assam, but the representation was disposed of without a clear decision. The respondents (State of Assam and tax authorities) argued that under GST law, tax liability arises on the supply of goods and services, and if the supply or invoice is raised post-01.07.2017 and payment is received thereafter, GST would be applicable even for contracts awarded before that date.

Key Issues

1. Whether the tax liability on works contracts executed before 01.07.2017, but for which payment was received after 01.07.2017, should be determined under the VAT regime (5%) or the GST regime (12%)? This issue turns on the interpretation of when the tax liability arises under the GST regime, particularly concerning the timing of supply and payment. Petitioner's argument: The petitioner argued that since the works were successfully executed during the VAT regime (2015-2016), the tax liability should be governed by the VAT rate of 5%, irrespective of the payment date. Revenue's argument: The respondents contended that under the GST law, tax liability arises on the occurrence of a taxable event, which is the supply of goods and services. They relied on Circular No. 3/2017-GST dated 24.08.2017, arguing that if the supply is made or an invoice is raised on or after 01.07.2017, and payment is received thereafter, GST at the applicable rate would be leviable, even if the contract was awarded prior to 01.07.2017.