Extra 6% GST reimbursement directed to be paid to contractor as court holds government entity liable to bear enhanced tax burden post rate revision

Case Title: Jitendra Kumar Mishra v. State of Madhya Pradesh and Others
Court: High Court of Madhya Pradesh, Jabalpur Bench
Petition No.: W.P. No. 38994 of 2024
Judgment Date: 18 December 2024
Category of Dispute: Rate of GST / Contractual Reimbursement
Relevant Sections: Section 9 and Section 11 of the CGST Act, 2017; Article 226 of the Constitution of India; Notifications No. 24/2017-CT(R) dated 21.09.2017 and No. 15/2021-CT(R) dated 18.11.2021

Facts (Para 1–5)

The petitioner, Jitendra Kumar Mishra, executed construction works for a government entity under Agreement No. 10/2021-22 for construction and renovation of Government New Law College, Indore. The petitioner paid GST at 18% as per revised Notification No. 15/2021-CT(R) dated 18.11.2021 effective from 01.01.2022, while the respondent made payments applying the old 12% rate. Despite representations, the respondent continued to release bills at the lower rate, though it admitted its liability to pay the differential 6% in its letter dated 26.09.2022 but withheld payment citing lack of State Government approval.

Questions Before Court

Whether the petitioner is entitled to reimbursement of the additional 6% GST paid on construction services rendered to a government entity between 01.01.2022 and 30.09.2022 and whether non-payment on the ground of administrative approval is justified under the GST regime.

Observations (Para 6–9)

The Division Bench referred to its earlier order in W.P. No. 39378 of 2024 dated 12.12.2024 involving identical facts. It noted that:

• The dispute was not factual but purely legal and hence not barred by the existence of an arbitration clause.

• The rate of GST had indeed been increased from 12% to 18% w.e.f. 01.01.2022.

• As a government entity, the respondent was obliged to bear the enhanced tax liability since contractual payments are inclusive of prevailing statutory levies.

• The petitioner could not be compelled to bear a statutory tax burden imposed by a subsequent notification.

Judgment (Para 9–10)

The Court directed the respondent to pay the GST differential of 6% to the petitioner for the period from 01.01.2022 to 30.09.2022 within three months from receipt of the certified copy of the order, failing which interest at 6% per annum would accrue from the date of entitlement. The Court disposed of the writ maintaining parity with W.P. No. 39378/2024.

Between Fine Lines (Trade Perspective)

This judgment reinforces that when tax rates are revised by notification under GST, contractors working for government entities are entitled to reimbursement of the enhanced portion if their contracts are inclusive of taxes. Administrative delays or lack of departmental approval cannot override statutory obligations under GST. Businesses should maintain timely correspondence and documentary proof of revised tax liabilities to claim such reimbursements.

Table – Cases Referred

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