High Court Grants Relief; GST Increase Post-Bid Payable to Contractor

The petitioner, a government contractor, was awarded a road construction contract by the State of Tripura after the introduction of GST in July 2017. While submitting the bid, he had factored in tax liability under the earlier VAT regime at 6%. However, after GST came into force, tax liability effectively increased to 12%. Although the petitioner had initially communicated that he would not bear the increased tax burden, the final agreement executed in November 2017 did not incorporate this condition.

The contract contained a clause stating that all taxes were deemed included in the bid but also provided that taxes paid by the contractor would be reimbursed upon proof of payment. During execution, GST at applicable rates was deducted and paid. The contractor later sought reimbursement of Rs 2.21 crore, representing GST paid by him, over and above the amounts already reimbursed. Despite representations and earlier litigation, the State denied liability, leading to the present writ petition.

Issue Before Court: Whether the contractor entitled to GST reimbursement despite a post-GST rate increase and the absence of a detailed reimbursement schedule in the contract?

HC Decided: In a significant ruling for government contractors, the High Court has clarified that the state cannot hide behind paperwork to avoid paying legitimate tax reimbursements. The decision settles a long-standing dispute over who bears the cost of the GST transition in public works. The Court’s ruling was built on a foundation of fairness and commercial reality. Here are the key pillars of the judgment: The Reality of the GST Era: Since the contract was signed after July 2017, the Court held that the old 6% VAT rate was officially a thing of the past.

GST is the law of the land, and both parties must follow it. Ignoring Technical Loopholes: The state tried to argue that a missing “schedule” in the contract meant they didn’t have to pay. The Court dismissed this as an “overly technical” excuse, ruling that a missing attachment cannot cancel out a clearly written promise to reimburse. The Paper Trail: Since the contractor provided undisputed GST returns showing a payment of Rs. 2.21 crore, the Court found no reason for the State to withhold the funds. Accordingly, the Court directed the State to reimburse ₹22,148,746.08 along with interest at 12% per annum from the respective dates of payment within three months.

To Read Full Judgment, Download PDF Given Below.