Govt Authority Must Reimburse GST on Post-GST Contracts: Explained
When GST was introduced on 1st July 2017, many contractors faced a tricky situation: older contracts didn’t include GST clauses, but new tax liability arose. If you’re dealing with such post-GST contracts, here’s what the law and courts say.
Why Govt Must Reimburse GST
- Contracts signed before 01.07.2017 didn’t factor in GST.
- Post-GST, contractors had to pay tax from their pocket if authority refused reimbursement.
- Courts clarified this violates the principle of natural justice and Section 64A of the Sale of Goods Act, 1930 (which applies by analogy).
- Various High Courts held that government departments must compensate contractors for GST if not included in bid amounts.
Key Case Laws Supporting Contractors
| Court | Case Reference | Ruling |
|---|---|---|
| Allahabad HC | Writ C No. 8125 of 2020 | GST must be reimbursed if contract silent on tax post-GST. |
| Delhi HC | M/s Pradeep Kumar Gupta vs UOI | Denial of GST reimbursement arbitrary and unfair. |
| Kerala HC | WP(C). No. 2533 of 2022 | Department directed to refund GST amount to contractor. |
Practical Steps for Contractors
- Check Contract Date: If executed before 01.07.2017, GST reimbursement claim is stronger.
- Maintain Proof: Keep all invoices and GST payment challans ready.
- File Representation: Write to the department citing relevant court orders.
- Approach Court: If refused, file a writ petition in High Court under Article 226.
Expert View: Simple Tip
“Always add a tax variation clause in new contracts. This safeguards you from paying taxes out of pocket when laws change.” — Efiletax Legal Team
Related Read
👉 Read how to claim GST refunds on works contracts — Efiletax Guide
FAQs
Q1. Can a contractor claim GST reimbursement for post-GST works?
✅ Yes, if the contract was silent on GST and was signed before 1st July 2017.
Q2. What if the department denies GST reimbursement?
✅ File a representation first. If rejected, you may file a writ petition in your jurisdictional High Court.
Q3. Which law supports this claim?
✅ Various High Court judgments and the general principle under Section 64A of the Sale of Goods Act, 1930.
Snippet Summary (47 words)
Govt authorities must reimburse GST on contracts signed before GST rollout if the tax wasn’t included initially. Courts uphold this to prevent undue burden on contractors. Keep documents ready, file for reimbursement, or approach High Court. Efiletax helps you claim rightfully!
Closing
Contractors shouldn’t bear tax costs unfairly. If you face issues claiming GST reimbursement on post-GST contracts, contact Efiletax for legal support and filing assistance today!