A contractor is entitled to GST payments on completed works, as tender rates must be exclusive of GST per government circulars.

JUDGMENT :

HARISANKAR V. MENON, J.

The petitioner is stated to be a contractor and pursuant to a notice inviting tender dated 23.02.2019, floated by the respondent – Municipality, placed the tender, and the petitioner was also awarded the work as evidenced by Ext.P1 work order dated 18.06.2019. An agreement was also entered into between the petitioner and the respondent – Municipality, as evidenced by Ext.P2, as per which the total estimate for the work is a sum of Rs.2,53,82,519.35. The petitioner contends that the amount quoted above and forming part of the agreement is exclusive of GST with reference to the provisions of the CGST/SGST Act, 2017. Therefore, with reference to various circulars issued by the Government, the petitioner state that while making periodical payments to the petitioner, GST was also paid to it. Later, pursuant to an audit report at Ext.P15, wherein it was recorded that the GST is included in the quote placed by the petitioner, the payment of GST effected to the petitioner till that date was found to be inappropriate. On that basis, steps for recouping GST already paid were also taken. The petitioner, in such circumstances, sought for certain clarifications under the provisions of the Right to Information Act, 2005 , in response to which, Ext.P17 communication dated 25.11.2022 has also been issued by the respondent – Municipality, seeking to clarify the position with reference to the liability of the Municipality to satisfy GST while making payments to the petitioner as above. It is in such circumstances that the petitioner is before this Court seeking to challenge the audit report at Ext.P15 as well as the communication at Ext.P13, issued by the Assistant Engineer attached to the Municipality, concluding that the payments towards GST already effected to the petitioner requires to be recouped.

2. I have heard Sri.M.R. Dhanil, the learned counsel for the petitioner, as well as Smt. V. Renju, the learned Standing Counsel for the respondent – Municipality.

3. The short issue arising for consideration in this writ petition is as to whether the respondent – Municipality, is required to satisfy the GST component while making periodical payments to the petitioner as against the bills raised by it. The petitioner seeks to rely on Ext.P4 circular dated 14.12.2017, issued by the Finance (Industries & Public Works) Department, which clarified that while obtaining administrative sanction, the total amount submitted for approval should separately indicate the estimated cost and the applicable GST. However, the aforementioned requirement is with reference to the mandate for the Municipality while obtaining the administrative sanction. Clause 2 of Ext.P4 states that in the tender documents, the rate quoted should be “exclusive of GST” but “inclusive of all other taxes”, etc. At the same time, it further states that the contractor is required to indicate separately the applicable GST in the tender document. According to Smt. V. Renju, the petitioner having not separately shown the GST in the tender document, the benefit cannot be extended to it. Even on the face of the afore, this Court notices that the tender documents, as noted earlier, should only show the rates quoted by the contractor without including the “GST”. Therefore, in my opinion, the tender placed by the petitioner has to be understood as one filed without disclosing the GST component.

4. In the light of the afore, clauses 3, 4, and 5 of the Ext.P4 circular requires to be noticed as under:-

“3) For the purpose of determining L1, the rates quoted by contractors exclusive of GST should be taken into consideration.

4) When the bills for any Goods, Services or Works procured by any Gove