Refund reconsideration directed as Court held that tax liability bifurcation between Telangana and Maharashtra must be based on actual work executed under Section 12(3) of IGST Act

Case Title: M/s. L&T PES JV v. Assistant Commissioner of State Tax & Ors.
Court: High Court for the State of Telangana, Hyderabad
Petition Numbers: W.P. Nos. 6271 & 6299 of 2020
Judgment Date: 29 November 2024
Category: Refund / Determination of Place of Supply under IGST
Relevant Sections: Sections 2(119), 12(2), 12(3), 24(vi), 49(6), 51, 52, 54, 107 of the CGST/IGST Acts, 2017

Facts (Paras 3–5):

The petitioner, M/s L&T PES JV, an unincorporated joint venture between Larsen & Toubro Ltd. and PES Engineers Pvt. Ltd., was awarded a works contract for construction of the Medigadda Barrage under the Kaleshwaram Irrigation Project, spread across Telangana and Maharashtra. The petitioner had GST registrations in both States.
The issue arose as the contracting agency, Kaleshwaram Irrigation Project Corporation Ltd. (KIPCL), deducted TDS on the total value of work under Section 51 of the CGST Act and remitted the entire TDS to Telangana, although part of the work was executed in Maharashtra. This led to excess balance in the petitioner’s electronic cash ledger in Telangana and denial of refund under Section 49(6) read with Section 54. The department also issued demand orders under Form DRC-07 treating the entire project as taxable in Telangana.

Questions Before the Court (Para 9):

1. Whether the work executed by the petitioner falls under Section 12(2)(a) or 12(3) of the IGST Act?

2. Whether the work executed in two States amounts to intra-State or inter-State supply?

3. Whether the refund application was maintainable in view of the above determination?

Observations (Paras 10–24):

• The Court noted that the contract is a works contract service under Section 2(119) of the CGST/IGST Acts.

• Section 12(3) governs the place of supply of services in relation to immovable property spread over more than one State. Thus, tax must be apportioned based on the value of services executed in each State.

• The Court agreed with the appellate authority that Section 12(3) applies—not Section 12(2)(a)—since the project involved construction of immovable property across two States.

• The deduction of entire TDS by the Telangana entity was held improper, as the recipient (KIPCL) was not registered in Maharashtra, violating Section 24(vi) read with Section 51.

• The High Court observed that respondent authorities erred in treating the entire project turnover as taxable in Telangana merely because the project was funded by the Telangana Government.

• However, since the petitioner failed to produce documentary evidence of tax discharged in Maharashtra or bifurcation of work between the two States, the Court refrained from granting refund directly.

Judgment (Paras 25–26):

The Court disposed of the writ petitions, holding that:

• The works executed across Telangana and Maharashtra fall under Section 12(3) of IGST Act, and the place of supply must be determined proportionately between the two States.

• The refund claim was rejected on technical grounds, but the petitioner is at liberty to approach the adjudicating authority with cogent documentary evidence showing tax discharge in Maharashtra.

• The adjudicating authority shall reconsider the refund claim and pass a fresh order after granting due opportunity of hearing.

• No costs were awarded.

Summary of Cases Referred

Between Fine Lines (Trade Impact):

The decision reinforces that for multi-State works contracts, GST liability and refund eligibility must align with Section 12(3) — i.e., based on the actual location of work execution, not the funding source or recipient’s registration. Businesses executing inter-State infrastructure contracts must ensure separate registration, invoice segregation, and TDS remittance alignment to avoid refund denials or erroneous demands.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”