Contractors Are Liable To Pay GST At Rate Prevalent On Day Of Receipt Of Tender, Not When Work Is Allotted: J&K High Court

The Jammu and Kashmir High Court held that the contractors were liable to pay GST at a rate prevalent on the last day for the submission of the tenders and not when the work was allocated as the same was clear from the Special Condition No.49 existing in the contract agreement. The petitioners had filed the review on the ground that as per section 13 of the CGST Act the liability to pay tax on services arise at the time of supply of the work and thus provision of the contract was contrary to the section 13 of the Act. A bench of Justices Sanjeev Kumar, Justice Puneet Gupta observed that the review petitioner being a contracting party was bound by the terms of the contract which provides that tax rates as prevailing on the last due date for receipt of tenders will be applicable and in the absence of any challenge to above provision at any point of time the arguments presented were unsustainable. The court said that on the last day for receipt of tender the applicable tax rate on GST was 18% and recommendation of the GST cousel for slashing the tax rate to 12% was brought into effect by notification after the date of receipt of tenders and same was not applicable to petitioners. The court said that the applicable GST rate was 18% even though the GST Council had made a recommendation, it was not notified until 21 September 2017 on which date the submission of bidding was already completed. The court observed it was not understood as to how incidence of GST or the manner in which the change in rates of taxes in respect of supply of goods and services would impact the charging of GST is of any help to the review petitioner. The petitioner had argued that the contract which the review petitioner executed was governed by SRO-GST-2 whereby the composite supply of works contract was made exigible to GST @ 12%. Thus, the recovery of differential tax based on 18% is not justified. In response to this submission, the court said that changes in the rates of GST in above SRO-GST were only with respect to specific composite supply of works contract which were the works contracts for construction or installation of specified items like a historical monument, canal, pipeline conduit etc The court added that at the time of submission of bids prevalent rate of GST was 18% change in SRO-GST-2 which is pleaded by review petition was only with respect to above specific items. The Court said that there was no error apparent, no new facts, and no sufficient reason to reopen or alter the judgment sought to be reviewed. BACKGROUND The petitioner sole proprietor of M/s Kiran Constructions, submitted tenders for a works contract after the GST Council's recommendatio to reduce GST from 18% to 12%, but before the formal notification dated 21 September 2017. The last date for tender submissions was 1 August 2017, when GST was still 18% as per SRO-GST-11 dated 8 July 2017. After the contract was allotted and work commenced post the 12% notification, the petitioner received a notice on 6 April 2021 to deposit the differential tax amount, calculated at the earlier 18% rate. APPEARANCE: Ajay Kumar Vali, Advocate with Raghav Gaind, Advocate For Petitioner Vishal Sharma, DSGI For Respondents Case-Title: Vishal Verma vs Union of India , Citation: 2025 LiveLaw (JKL) 151Click Here To Read/Download The Order

Contractors Are Liable To Pay GST At Rate Prevalent On Day Of Receipt Of Tender, Not When Work Is Allotted: J&K High Court

Aleem Syeed

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