Contractor Can Claim Increased GST During Work, Even If Bills Were Paid Before Rates Increased: Kerala High Court

The Kerala High Court has held that a contractor can claim increased GST (Goods and Services Tax) during work, even if bills were paid before the rate increase. Justice Ziyad Rahman A.A. opined that at the time of execution of the contract, the rate was only 5% and the increase took place during the execution of the work. Thus, the assessee is entitled to a differential amount of tax. In this case, the assessee/petitioner is a partnership firm and is engaged in the construction work, including the works for the Government Departments. The assessee was given a project by the Kerala Water Authority. The project involved supplying, laying, commissioning and maintaining water pipelines. The assessee completed the work on 31.03.2023. However, according to the assessee, the differential amount receivable by the assessee towards the increase in the rate of GST was not paid by the respondents (State of Kerala), despite the fact that they are under a contractual obligation to pay the same. Besides, the security deposit furnished by the assessee was also not released. As per the assessee, he is entitled to get the differential amount in GST, as the rate of GST was increased during the execution of the contract from 12% to 18%. The department submitted that the GST applicable to the works were revised from 12% to 18% with effect from 18.07.2022, and therefore, all the works completed and invoices generated before 18.07.2022 will be only 5% and not 12%. According to the department, a major part of the assessee's bills was generated prior to 18.07.2022, and all the bills were already paid. The bench, after going through the terms and conditions in the contract, noted that the assessee is entitled to a differential rate of tax, which the assessee had paid on account of the revision of tax during the execution of the work. If the assessee was found liable to pay tax at the rate of @18% pertaining to the transactions relating to the contract in question, under no circumstances, the assessee be denied the reimbursement of the aforesaid payment, stated the bench. The bench opined that in case the assessee produces records to show that he had paid the tax @18% in respect of the works carried out concerning the contract entered into between the assessee and the respondents, the assessee shall be granted reimbursement of the amount. In view of the above, the bench directed the Superintending Engineer and Executive Engineer to release the differential amounts of tax receivable by the assessee. Case Title: M/s Shree Contractor v. State of Kerala Case Number: WP(C) NO. 37299 OF 2024 Citation: 2025 LiveLaw (Ker) 750Counsel for Petitioner/Assessee: Mini and A. Kumar Counsel for Respondent/Department: P.M. Johny and Justine Jacob Click Here To Read/Download The Order

Contractor Can Claim Increased GST During Work, Even If Bills Were Paid Before Rates Increased: Kerala High Court

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