GST Update

Desk of CA. Praveen Sharma – CAPS Series 1022 

Punjab & Haryana High Court in the case of SKG Infratech Pvt. Ltd.

Issue Involved:
Whether a contractor executing works contracts for a Government Authority is entitled to reimbursement of the additional GST burden arising due to the increase in GST rate from 12% to 18% with effect from 01.01.2022.

Facts of the Case

The petitioner was executing public works contracts for Haryana Shehri Vikas Pradhikaran (HSVP), a Government Authority.

 Earlier, such works contract services were taxable at 12% GST.

Pursuant to Notification No. 22/2021-CT (Rate) dated 31.12.2021, the concessional rate was withdrawn for Government Authorities, resulting in GST increasing to 18% w.e.f. 01.01.2022.

 The Government of Haryana, vide communication dated 01.02.2023, allowed reimbursement of the additional GST burden in certain cases.

However, HSVP granted the benefit only where payments were made on or after 18.07.2022, whereas the petitioner contended that the correct effective date should be 01.01.2022, being the date from which GST increased.

 Petitioner’s Contention

 HSVP falls within the definition of a Government Authority.

Therefore, GST at 18% became applicable from 01.01.2022 itself.

Consequently, reimbursement of the increased GST burden should be granted from 01.01.2022 and not from 18.07.2022.

Court Proceedings

During the hearing, the High Court questioned the respondents regarding:

Notification dated 31.12.2021
 Haryana Government communication dated 01.02.2023

The respondents submitted that the competent authority would reconsider the matter and take corrective steps, if required.

The petitioner agreed to this arrangement.

Decision of the High Court

The writ petition was disposed of.

The respondents were directed to reconsider the issue.

Necessary action, if warranted, shall be taken within two months.

Key Takeaway

Where the GST rate applicable to Government Authorities was increased from 12% to 18% w.e.f. 01.01.2022, authorities cannot mechanically adopt a later cut-off date without examining the legal effect of the relevant GST notifications.

LINK:CA. Praveen Sharma on Linkedin

Regards
CAPS