The court clarified that tender evaluation criteria allowing participation of both registered and unregistered dealers is permissible under the GST framework, ensuring competitive bidding.

JUDGMENT

1. The present writ petition has been filed by the petitioners who are Contractors undertaking works in the Kerala State Electricity Board (hereinafter referred to as ‘KSEB’ for short) and they are also registered as dealers under the provisions of CGST/SGST Act , 2017. The challenge in this writ petition is to the Clause 3 of Exhibit P-3 Circular No. FA/Tax Cell/GST-Tendering/2020-21 dated 24.02.2021 issued by the KSEB regarding award of the tender. Clause 3 provides process/mechanism for tender evaluation which on reproduction read as under;

3. Tender Evaluation:

Tenders should be evaluated on the basis of the quoted PAC exclusive of taxes, except in the following cases-

a. In cases where the bidders participated in a Tender consists of both registered and unregistered parties. Tenders shall be evaluated based on the total cash outflow to KSEBL. That is the rates quoted by contractors excluding Taxes plus the prevailing GST (for registered parties) should be taken into consideration for the purpose of determining the LI bidder.

b. If reverse charge is applicable for the subject work at the time of tender evaluation, KSEBL’s liability on account of Reverse Charge Mechanism should also be considered (as cash outflow) in the evaluation of the tender.

c. If the bidder is a composite dealer (which can be identified from the GST registration certificate furnished by the bidder (Type of Registration- Composite) such contractors shall be evaluated as if they were unregistered contractors and clause (a)

above shall be made applicable.

d. In case of tenders having PAC less than or equal to Rs. 20 Lakhs, if the GST registration details were not specified by a registered bidder while submitting the Tender, he shall be treated as if he were an unregistered dealer. If the work was awarded to that bidder treatign him as an unregistered dealer and at a later stage if it is found that he holds a valid GST registration, he should be insisted to provide GST Invoice indicating the quoted amount and GST and in such a case the quoted amount registration, he should be insisted to provide GST Invoice indicating the quoted amount and GST and in such a case the quoted amount shall only be reimbursed to him and the GST amount shall not be reimbursed.

e. ICS u/s 206C (1H) need to be considered for Tender evaluation.

2. The learned Counsel for the petitioner submits that the registered dealer under the GST Act cannot compete with the unregistered dealer as the unregistered dealer would not be required to pay GST whereas the registered dealer is required to pay tax. Therefore, there would always be a possibility of registered dealer opting higher price than the unregistered dealer and in that view of the matter the registered dealer would be prejudiced as they would not get the contract. He further submits that the Clause 3 of Exhibit P-3 Circular is in violation of Articles 14 and 19 and therefore, liable to be set aside.

3. The learned Counsel for the respondents submits that the unregistered dealer can participate in tendering process upto value up to Rs. 20,00,000/-, the Contract up to value of Rs. 50,00,000/- are exempted from GST registration. When under the provisions of the CGST Act itself, no registration is required for carrying out the contract work up to value Rs. 20,00,000/-, the KSEB cannot stipulate the condition of registration in respect of the Award of contract up to Rs. 20,00,000/-. It is further submitted that under Clause 3(a) of Exhibit P-3 Circular, the tenders are to be evaluated based on the total cash outflow so that the bidders who do not possess GST registration will not be deprived of being denied the right to be awarded with tender work based on lower amounts in the bidding process and the Board will be able to award the work at a competitive price for the lowest bidder.

4. It is further submitted that same position was pre-GST regime wherein the Contractors/suppliers having VAT/Service Tax Registration were quoting taxes a