Can GST Be Claimed for Pre-GST Tenders? Bombay High Court Says Yes to Indu Construction

Nagpur, July 16, 2026 – In a significant ruling for contractors handling long-term government projects, the Bombay High Court at Nagpur has held that Goods and Services Tax (GST) introduced after a tender was awarded cannot be treated as part of the contractor’s quoted rates simply because the contract mentioned "applicable taxes." The Division Bench of Justice Anil S. Kilor and Justice Raj D. Wakode allowed the petition of M/s Indu Construction, quashing the Nagpur Metropolitan Regional Development Authority's (NMRDA) rejection of its GST reimbursement claim.

Background of the Dispute

The case arose from a tender floated on June 2, 2014, by the Nagpur Improvement Trust for affordable housing construction at Wathoda, Nagpur. Indu Construction, a proprietorship firm, emerged as the successful bidder and received a work order on August 25, 2014. GST came into force on July 1, 2017, while the project was still ongoing, imposing a new tax burden not anticipated at the time of bidding.

Relying on a Government Circular dated September 19, 2017, and a Government Resolution (GR) dated January 21, 2021—both providing mechanisms for compensating the extra GST burden on ongoing contracts—Indu Construction submitted a reimbursement claim on June 8, 2022. The claim covered RA Bills Nos. 14 to 29. NMRDA referred the claim for verification to its empanelled Chartered Accountant, Rodi Dabir and Company, which certified the amounts on June 28, 2022. Despite this verification, NMRDA rejected the claim six months later via a communication dated December 20, 2022, prompting the writ petition.

Arguments from Both Sides

Petitioner’s Case: Senior Advocate M.G. Bhangade, appearing for Indu Construction, argued that the tender’s Clauses 25 and 48, which required rates to include "all applicable taxes," could not cover taxes that did not exist when the contract was signed. He pointed to the government’s own circulars and resolutions, which specifically addressed GST reimbursement for ongoing contracts, and noted that many similarly placed contractors had already received such reimbursements. He also contended that the pre-bid meeting clarification—stating that future taxes would be borne by the contractor—could not override the express terms of the tender, citing the Supreme Court’s ruling in B. Rugmini Amma v. B.S. Nirmala Kumari (2013).

Respondent’s Case: Advocate G.A. Kunte, for NMRDA and other respondents, defended the denial by relying on the same Clauses 25 and 48, as well as the pre-bid clarification. He argued that the petitioner, having accepted the contract after the pre-bid meeting, could not now claim additional payment. He also noted the petitioner’s delay in raising the issue, waiting until after project completion.

Court’s Legal Analysis

The High Court rejected the respondents’ interpretation, holding that Clauses 25 and 48 spoke only of taxes applicable at the time of tendering, not future levies. The Court observed:

"The taxes which are not recoverable by the Government from the contractors, on the date of tender, cannot be the basis for quoting the rates while submitting the bid."

On the pre-bid clarification, the Court relied on B. Rugmini Amma to hold that a clarification cannot override the main terms of the tender. Since the clarification contradicted the tender conditions, it had no legal effect.

The Court also found the respondent’s conduct arbitrary. After referring the claim to a Chartered Accountant for verification and receiving a positive report, rejecting the claim six months later without fresh reasoning was unreasonable. Moreover, the Court invoked Article 14 of the Constitution, noting that denying reimbursement to Indu Construction while granting it to other contractors in identical circumstances would amount to "treating equals unequally."

Key Observations

The judgment underscored the importance of fairness in government contracting. It noted:

" Article 14 of the Constitution of India forbids the Government and its authorities to act unfairly, arbitrarily and unreasonably."

And further:

"If it is the case of the respondents that except the petitioner, all other contractors are entitled to claim GST reimbursement and the petitioner cannot claim reimbursement because of aforementioned clarification recorded in the pre-bid meeting, it would be in violation of Article 14."

The Decision

The Court allowed the writ petition, quashed the December 20, 2022 communication, and held that Indu Construction is entitled to GST reimbursement for the amount verified by the Chartered Accountant, Rodi Dabir and Company. The respondents were directed to make the payment within eight weeks. The rule was made absolute with no order as to costs.

This ruling provides clarity for contractors and government authorities alike: tender clauses referencing "applicable taxes" do not automatically include taxes introduced after the contract award, and pre-bid clarifications cannot override express tender terms. It reinforces the principle that government bodies must treat similarly situated parties equally.