Why CA Cannot issue GST Clearance Certificate in Service Tenders: Insights from Bombay HC Order [Read Order]

Government service tenders often impose strict eligibility conditions to ensure that public work is awarded only to compliant and reliable contractors. One common requirement is the submission of a “GST Clearance Certificate.”

A recent decision of the Bombay High Court has clarified that such a certificate cannot be issued by a Chartered Accountant and must come from the GST Department itself. This ruling has important consequences for bidders, tender authorities, and tax professionals.

Background of the Tender and Dispute

The case arose from a tender issued by the District Collector for providing services such as pandals, furniture, and ancillary items for the 2025 Zilla Parishad and Panchayat Samiti elections. The tender document required bidders to submit several mandatory documents, including a GST clearance certificate valid up to the end of March 2025.

The petitioner submitted a certificate issued by his Chartered Accountant, stating that GST returns for the relevant year were produced before him. The tendering authority rejected the technical bid on the ground that the GST clearance certificate was not issued by the GST Department. The petitioner challenged this rejection before the Bombay High Court.

Requirement of GST Clearance Certificate in Service Tenders

In service contracts, GST is compulsorily applicable on outward supplies. The Government, therefore, has a legitimate interest in ensuring that contractors are compliant with tax laws before awarding public work.

A GST clearance certificate is intended to confirm that the bidder has no outstanding tax liability and has complied with filing and payment requirements. In election-related tenders, where transparency and legality are paramount, such compliance conditions are treated as essential and non-negotiable.

Arguments of the Petitioner

The petitioner raised several arguments before the Court.

First, it was argued that the tender document did not explicitly state that the GST clearance certificate must be issued by the GST Department. Since the issuing authority was not specified, a certificate issued by a Chartered Accountant should have been accepted.

Second, the petitioner contended that similar certificates issued by Chartered Accountants had been accepted in other districts under comparable tenders. According to him, rejecting his bid amounted to unequal treatment.

Third, reliance was placed on an earlier Supreme Court judgment in Kimberley Club Private Limited vs. Krishi Utpadan Mandi Parishad and Others, where rejection of a tender was held invalid because the tender conditions did not specify the issuing authority of a required certificate.

Lastly, the petitioner argued that he was not given a proper opportunity to rectify the alleged defect, even after making representations to the Collector.

Arguments of the Respondents

The State authorities argued that the requirement of a GST clearance certificate inherently meant a certificate issued by the GST Department.

They argued that a Chartered Accountant has no statutory authority to certify whether GST has actually been paid or whether any arrears or demands exist. At best, a CA can verify returns produced by the assessee, but that does not amount to tax clearance.

For when commentary misleads and only the statute matters. Click here

The respondents also pointed out that the petitioner was, in fact, already in possession of a GST clearance certificate issued by the Department, but he failed to upload it while submitting the tender. Instead, he chose to rely on a private certificate.

They further argued that the condition was mandatory and substantial, and therefore, no opportunity for correction was required.

Whether GST Law Recognises a “GST Clearance Certificate”

The court observed that although the GST Act does not expressly define a document called a “GST clearance certificate,” only the GST Department maintains official records of tax payments, filings, and outstanding liabilities.

So, any confirmation of tax compliance can only be authoritative if it comes from the Department. A certificate issued by a private professional, regardless of qualification, does not have statutory recognition for this purpose.

Court’s Observations and Reasoning

The Bombay High Court made several critical observations.

The court held that the requirement of a GST clearance certificate carries an inherent meaning that it must be issued by the concerned Department. This need not be expressly stated in the tender document.

It observed that the Chartered Accountant’s certificate did not even claim personal knowledge of tax payment. It merely stated that GST returns were produced before him. Such a certificate cannot establish that taxes were actually paid or that no dues were pending.

The court also emphasised that this was a tender for services where GST payment is compulsory. Therefore, confirmation of tax compliance was a fundamental condition.

The court noted that the petitioner already had a departmental GST clearance certificate dated prior to the opening of the technical bid but failed to upload it. No explanation was given for preferring a private certificate over an official one.

On these grounds, the Court concluded that rejection of the technical bid was justified and lawful.

Distinction from Earlier Judicial Precedents

The court distinguished the Supreme Court judgment relied upon by the petitioner. In that case, the certificate related to financial capacity, which could be certified by different authorities.

On the contrary, GST compliance involves payment of tax to the Government. Only the tax department can certify such compliance. Therefore, the earlier precedent was held to be inapplicable.

Professional and Ethical Implications for Chartered Accountants

The judgment carries a clear warning for Chartered Accountants. Issuing certificates that imply official GST clearance goes beyond their statutory role.

CAs must restrict their certifications to factual verification based on records and avoid language that suggests tax clearance or departmental confirmation. Failure to do so may expose them to professional and ethical consequences.

Impact on Tender Authorities and Bidders

Tender authorities are entitled to strictly enforce mandatory conditions, especially where public revenue and statutory compliance are involved.

Bidders must ensure that all required documents are issued by the competent authority and are uploaded correctly and on time. Past leniency or practices in other districts cannot be relied upon as a matter of right.

Conclusion

The Bombay High Court’s decision firmly establishes that a GST clearance certificate for service tenders must be issued by the GST Department and cannot be substituted by a Chartered Accountant’s certificate. The ruling reinforces strict compliance, clarifies professional boundaries, and promotes integrity in public procurement.

Read the case summary and PDF here.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates