The Karnataka High Court has directed government authorities to examine and decide a civil contractor’s claim for payment of GST amounting to nearly ₹2.99 crore in connection with road construction and improvement works carried out for government departments.
The decision highlights an important issue concerning the recovery of GST from government authorities under works contracts, particularly where there is a dispute over whether the GST component was already included in the amounts paid under the original tender and final bills.
Background of the Case
The case arose from a writ petition filed by Shri Jinaraj and Co. Registered, a Class-I civil contractor, before the Karnataka High Court.
The contractor had undertaken several road construction and improvement projects for government authorities during the financial years 2018-19 to 2022-23.
According to the contractor, the tender rates were originally quoted at a time when the applicable tax structure was different. Subsequently, GST became applicable to the works at the rate of 12%, resulting in an additional tax liability for the contractor.
The contractor claimed that the corresponding GST amount had not been separately reimbursed by the government authorities.
Contractor Claimed Nearly ₹2.99 Crore as GST
The contractor submitted representations before the concerned authorities on 19 August 2024, seeking payment of GST relating to different works.
The claims consisted of:
- ₹2.61 crore towards GST for one set of works;
- ₹25.18 lakh towards another work; and
- ₹12.44 lakh towards a further work.
The aggregate claim was approximately ₹2.99 crore.
However, the representations remained pending without a final decision from the authorities. The contractor therefore approached the Karnataka High Court seeking appropriate directions for consideration of its GST claims.
Government Authorities Disputed the Additional GST Claim
The government authorities opposed the contractor’s contention.
Their principal argument was that the contractor had quoted rates under the tender after taking into account taxes and duties applicable to the contract. They further contended that the final bills had already been scrutinised and settled after taking the applicable GST into consideration.
According to the authorities, the contractor could not subsequently demand an additional amount over and above the tendered and accepted rates.
Thus, the dispute essentially revolved around whether the amounts already paid under the contracts actually included the GST component claimed by the contractor.
Karnataka High Court’s Observations
Justice Sachin Shankar Magadum observed that the contractor’s grievance could not simply be left pending without a decision by the competent authorities.
The Court noted that merely keeping the representations pending would leave the petitioner without an effective remedy concerning the claim being asserted.
The High Court also examined the significance of GST being separately applicable to taxable services.
Where GST is legally leviable on a taxable supply and the service provider raises an invoice incorporating the applicable GST, the recipient is required to discharge the GST liability in accordance with law.
However, the Court did not itself determine that the contractor was automatically entitled to the entire amount claimed.
Instead, it directed the competent authorities to undertake a proper examination of the factual and contractual position.
Authorities Must Provide a Clear Breakup of GST Already Paid
One of the significant aspects of the judgment is the Court’s direction concerning the authorities’ contention that GST had already been included in the final bills.
The Court observed that if the authorities maintained that the 12% GST component had already been paid, they should be able to demonstrate the same through a proper and intelligible calculation.
The authorities were therefore required to examine the relevant:
- Tender conditions;
- Work orders;
- Invoices;
- Bills submitted by the contractor;
- Payments already released;
- GST component included in the payments; and
- Applicable GST liability.
This exercise would enable the authorities to determine whether the contractor had already received the GST component or whether any additional amount remained payable.
Court Directs Speaking Order Within Six Weeks
The Karnataka High Court directed the competent authorities to independently consider and decide the contractor’s representations after examining the relevant contractual and financial records.
The authorities were further directed to pass reasoned and speaking orders and communicate their decisions to the contractor.
The entire exercise was required to be completed within six weeks from the date of receipt of a certified copy of the Court’s order.
Accordingly, the writ petition was partly allowed.
Significance for Government Contractors
The decision is relevant for civil contractors and other businesses executing taxable works for government departments.
A dispute regarding GST reimbursement cannot necessarily be resolved merely by stating that the tender price was inclusive of taxes. Where a contractor subsequently raises a GST claim, the authorities may need to establish from the contractual documents and payment records whether the GST component was actually included and paid.
At the same time, the judgment does not mean that every contractor automatically becomes entitled to an additional GST payment. The entitlement would depend upon the tender conditions, contractual terms, invoices, bills, payments made and the applicable GST provisions.
The ruling therefore reinforces the importance of maintaining proper documentation in government works contracts, particularly where there is a change in tax liability during the execution of a project.
Case Details
Case Number: Writ Petition No. 103475 of 2025 (T-RES)
Court: Karnataka High Court
Judge: Justice Sachin Shankar Magadum
Decision: Writ petition partly allowed; authorities directed to decide GST representations by passing reasoned orders within six weeks.
For the Petitioner: Advocate Sangram S. Kulkarni
For the Respondent: Additional Government Advocate Sharad V. Magadum