Refund Sought for Differential GST Paid on Works Contracts Executed under VAT Regime: Karnataka HC Allows Reimbursement to Mycon Constructions [Read Order]

The Karnataka High Court directed the State tax authorities and departments to reimburse the differential GST ( Goods and Services tax ) amount borne by the contractor on works executed under the earlier VAT ( Value added tax) regime but paid post-GST implementation.

The petitioner, Mycon constructions represented by its Director, approached the Court seeking refund of excess tax paid, contending that while works contracts had been awarded under the VAT framework, GST was later levied and discharged by contractors, without corresponding reimbursement by the government employers.

Justice M. Nagaprasanna, relying on earlier rulings of coordinate benches, observed that government departments are duty-bound to reimburse GST amounts to contractors.

The Court noted that contractors, being service providers, had discharged their statutory liability, while employers, government departments were equally obligated to refund the differential tax burden.

The Court said that in similar cases, directions had been issued to calculate pre- and post-GST work values separately, execute supplementary agreements where necessary, and reimburse contractors for the additional tax paid.

Accordingly, the Court allowed the petition and directed the respondents to refund the GST amounts indicated in the petitioner’s representations dated 12.06.2023, 15.06.2023, and 24.07.2023 within six weeks.

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