The Karnataka High Court in the case B S Kumar Swamy Versus State Of Karnataka observed and has issued the directions wherein the court determined the tax difference calculation for the pre-GST works contracts.
The bench headed by Justice S. Sunil Dutt Yadav in the case observed and has stated that the tax difference should be calculated on balance works executed or which is to be executed separately after 01.07.2017.
The petitioner in the plea seek declaration that the provisions of the Goods And Service Tax, GST Act are inapplicable in respect of works contracts wherein the provisions of service are made prior to July, 01, 2017.
However, the respondent in the case has no justification to either issue notice or in order take any coercive steps against the petitioners under the provisions of the GST Act dated July 1, 2017.
The court in the case observed and has directed the respondent-State to calculate the works executed pre-GST which being prior to July 1, 2017 under the KVAT regime and the payments which are received by the petitioner. Therefore, the payments which are received by the Petitioners pre-GST for such works executed before July 1, 2017 and are to be assessed under the KVAT tax regime, either under the COT or VAT schemes as applicable. Thus, the Input Credit on the materials is to be arrived at and it needs to be set off as against the output Goods And Service Tax, GST Act for those assessed under regular Value Added Tax, VAT.
Further, the court in the case observed and has issued the directions with regards to the tax difference on balance work which is executed or to be executed after 01.07.2017 separately. Therefore, the concerned department or authority has to decide whether the agreement needs to be changed or not, based on the result obtained from the calculation of the tax difference in the contract value. The petitioner also needs to sign a supplementary agreement with the Petitioners which being for the revised GST-inclusive work value and for the Balance of work completed or which is to be completed and in case of the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.01.2017, which is more than the original agreement work value, the Petitioners are to be paid or be reimbursed, as the case may be, the differential tax amount by the concerned employer. Subsequently, the concerned employer has to pay or reimburse the differential tax amount to the Petitioners, if in case the payments for works completed pre-GST are made post-GST, as the case may be.
The court while considering the facts and circumstances of the case observed and has directed the petitioners to submit comprehensive representations to the respective employers within the period of 4 weeks, irrespective of whether the petitioner have completed the works pre-GST or post-GST or whether the payments have been received or is yet to be received post-GST. Thus, the respective employee in the case is directed to consider and to dispose the plea in light of the directions as expeditiously as possible and at any rate within the period of 8 weeks from the date of submission of the representations.
The counsel, Advocate D.R. Ravishankar appeared for the petitioner.
The counsel, Advocate Hemakumar represented the respondent.