The Karnataka High Court directed the State and Government agencies to determine tax differences on Pre-Goods and Service Tax (GST) works contracts under the Karnataka Value Added Tax (KVAT) regime.
The writ petition was filed to declare that the provisions of the GST Act are inapplicable in respect of works contract where provisions of service are made before 01.07.2017 in so far as petitioners are concerned and consequently that the respondents have no jurisdiction to either issue notice or to take any coercive steps against the petitioners under the provisions of the GST Act dated 01.07.2017.
A Single Bench of Justice S Sunil Dutt Yadav directed the State and Government Agencies to calculate the works executed pre-GST (before 01.07.2017) under the KVAT regime and payments received by the Petitioners. The payments received by the Petitioners pre-GST for such works executed before 01.07.2017 are to be assessed under the KVAT tax regime – either under COT or VAT scheme as applicable.
The Court also directed to calculate the balance works to be completed or completed after 01.07.2017, in the original contract and to derive the rate of materials, and KVAT items required or used to complete the balance works.
The Court further noted that the Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT and the “tax difference” should be calculated on such balance works executed or to be executed after 01.07.2017 separately.
“A supplementary agreement may be signed with the Petitioners for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioners are to be paid /reimbursed, as the case may be, the differential tax amount by the concerned employer,” the Court said.
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