Insisting on a GST certificate for tax reimbursement lacks legal basis; compliance with GST regulations suffices for establishing liability discharge.

CORAM: HON’BLE MR. JUSTICE SACHIN SHANKAR MAGADUM C.A.V. ORDER The captioned writ petition is filed assailing the endorsement issued by respondent No.1 vide annexure-A demanding a specific certificate from the GST authorities to determine the tax difference on the contract value.

2. Facts leading to the case are as under:

The captioned petition raises an issue touching upon the transitional tax implications due to the shift from pre-GST regime to the post-GST indirect tax framework. The dispute in the present case on hand concerns the liability for differential tax arising from the implementation of Goods and Service Tax Act, 2017 (hereinafter referred to as "GST Act") wherein the respondent No.2/Corporation had issued a work order one day prior to implementation of the GST Act.

3. Respondent No.2/Corporation while not disputing the execution of work has withheld the differential tax amount demanding a specific certificate from the jurisdictional GST authority, asserting that only upon such certification, the remaining tax component would be released to the petitioner.

4. Heard the learned counsel for the petitioner and learned counsel appearing for the BBMP.

5. The petitioner, a registered contractor, was awarded a contract for the construction of a grade separator at Shivananda Circle, Bengaluru, pursuant to a work order dated 30.06.2017. The cost estimate for the said contract was prepared under the then prevailing Value Added Tax (VAT)

and Service Tax regime. However, the execution of the contract commenced immediately after the introduction of the Goods and Services Tax (GST) regime on 01.07.2017.

6. Upon execution of the work, the petitioner raised running account bills for the work done post-GST implementation, applying the applicable GST rates.

7. However, the respondents have withheld payment of the differential tax component on the ground that the petitioner must obtain a specific certificate from the jurisdictional GST authorities certifying payment of GST.

8. In light of the above facts, the following points arise for consideration:

(i) Whether the BBMP's insistence on production of a tax certificate from GST authorities as a precondition for reimbursement of differential GST is legally sustainable?

(ii) Whether the petitioner is entitled to claim reimbursement of the differential tax component, when the contract was executed post-GST despite being awarded under the pre-GST regime?

(iii) Whether compliance through filing of GSTR returns, production of CA certificates, and audit reports is sufficient to establish discharge of GST liability?

9. Before this Court delves into the points on hand, this Court deems it fit to take cognizance of the directions issued by the Co-Ordinate Bench in the reported judgment rendered in the case of Chandrashekariah .vs. State of Karnataka . The directions have a significant bearing on the stand taken by the BBMP in the captioned petition. For easy reference, the same is culled out, which reads as under:

"(i) Petitions are hereby disposed of.

(ii) The Respondents-State and other Govt agencies/Respondents who have entered into works contract with the Petitioners are issued the following directions/guidelines:-

(a) Calculate the works executed pre-GST (prior to 1- 7-2017) under KVAT regime and payments received by the Petitioners.

1 [2024] 158 taxmann.com 443(Karnataka)

(b) The payments received by the Petitioners pre-GST for such of the works executed before 1-7-2017 are to be assessed under KVAT tax regime - either under COT or VAT scheme as applicable.

(c) Calculate the balance works to be completed or completed after 1-7-2017, in the original contract.

(d) Derive the rate of materials, KVAT items required or used to complete the balance works.

(e) Deduc