Contractor Entitled to GST Reimbursement Despite Higher Tax Liability: Tripura High Court Orders Rs 2.21 Crore Refund with Interest

The High Court of Tripura ruled that because the contract was signed after GST came into effect, the contractor had to pay tax at 12%—not the old VAT rate of 6%. Still, Clause 42.1 of the agreement made it clear: the contractor could claim reimbursement for any GST actually paid, as long as he showed proof. The Court found the State’s refusal to refund Rs 2.21 crore unreasonable and ordered the amount returned, with 12% interest.

FACT OF THE CASE

Sri Nimai Kar, a government contractor, landed a road construction job from the PWD, Tripura, after a tender issued in March 2017. When he bid for the work, VAT at 6% applied. Before he even signed the contract, though, GST replaced VAT starting July 1, 2017. That meant taxes doubled overnight—from 6% to 12%. Nimai Kar wrote to the department, saying he wouldn’t shoulder any extra tax, and the work order nodded to that. But the actual agreement, signed on November 24, 2017, dropped this promise and only said taxes were “included in the bid”. As work went ahead, the department started deducting GST at 12% from his bills. He paid it, then asked to be reimbursed the roughly ₹2.21 crore he had shelled out. The government didn’t pay, so he went to court.

Issue

Was Nimai Kar supposed to pay tax at 6% or at 12%? Could he demand the GST back under Clause 42.1? And could the Court even step in, given this was a contract dispute?

Court Observation

The judges said, look—the agreement was signed after GST began, so Kar owed 12% as per the GST laws.’ He could not insist on the 6% VAT rate, since the final contract did not include that cushion. But the Court pointed at Clause 42.1, which clearly said he could get reimbursed for taxes paid, as long as he provided proof. The government tried to hide behind missing paperwork from their end (Part II of Schedule A was not attached), but that argument did not stick. The contract’s wording and his receipts of the GST returns all showed he really did pay Rs 2.21 crore. The State never said he had not. Refusing to pay him back was random and unfair, and the Court said, it violated Article 14 (which is all about equal treatment under the law). The Court also made it clear: when the government acts unreasonably in contracts, courts can step in.

Judgement 

So, the High Court ruled in Kar’s favour. Yes, he was right to pay GST at 12%, but the government had to reimburse him under the contract. The State was told to refund Rs 22,148,746.08, after subtracting whatever had already been paid, plus interest at 12% per year starting from each payment date. They were given three months from when the judgement was delivered to settle up.