Review petition dismissed as court upheld contractual tax clause and clarified that GST Council’s recommendations are not binding until notified.

Case Details

• Case Title: Vishal Verma v. Union of India & Others

• Court: High Court of Jammu & Kashmir and Ladakh at Jammu

• Petition Number: RP No.43/2024 (arising out of WP(C) No.932/2021)

• Date of Judgment: 08.04.2025 (Reserved on 02.04.2025)

• Category of Dispute: GST – Rate of Tax on Works Contract / Recovery of Differential Tax

• Relevant Provisions: Section 13 & 14 CGST Act, 2017; Article 265 Constitution of India; SRO-GST-11 dated 08.07.2017; SRO-GST-02 dated 22.08.2017; SRO-GST-06 (Rate) dated 21.09.2017; Special Condition No.49 of Tender Document.

Facts (Paras 2–5)

The petitioner, Vishal Verma (M/s Kiran Constructions), was awarded works contracts under Military Engineering Services. At the time of bid submission (01.08.2017), GST on works contracts stood at 18% under SRO-GST-11 (08.07.2017). On 05.08.2017, the GST Council recommended reducing GST on works contracts to 12%, but the statutory notification was issued later on 21.09.2017. The petitioner argued that since the work orders were issued after the notification, GST @12% applied. Notices demanding differential tax were issued in 2021. Earlier, in Pardeep Electricals & Builders Pvt. Ltd. (23.12.2020), the Court held liability to pay tax undisputed but emphasized adherence to principles of natural justice regarding quantification. Petitioner’s writ was dismissed on 03.11.2023. The present review petition sought reconsideration.

Questions (Paras 5–7, 13)

1. Whether the work orders issued after 21.09.2017 entitled the contractor to 12% GST rate rather than 18%.

2. Whether Special Condition 49 of the tender (taxes to be reckoned as per last date of bid submission) was ultra vires Section 13 of the CGST Act.

3. Whether SRO-GST-02 dated 22.08.2017 had already reduced GST on works contract to 12%.

4. Whether the Court’s earlier order suffered from an error apparent on record warranting review.

Observations (Paras 8–17)

• Special Condition 49 explicitly made contractors liable on the tax rate prevailing on the last date of tender submission; any later reduction required refund to the Government.

• On 01.08.2017, the applicable GST was 18%. The GST Council’s 05.08.2017 decision was only a recommendation, not law, as per Article 265. Notification reducing the rate to 12% was issued only on 21.09.2017.

• The plea that SRO-GST-02 (22.08.2017) had already reduced GST was rejected. It applied only to specific government contracts like monuments, canals, pipelines, etc., not general works contracts. For construction services under Heading 9954, GST remained 18% until reduced on 21.09.2017.

• The petitioner neither challenged Condition 49 nor brought new facts or errors apparent on record. Raising new arguments in review was impermissible.

Judgment (Paras 17–18)

The Court dismissed the review petition, holding that:

• No error apparent existed in the earlier judgment.

• Special Condition 49 bound the contractor.

• GST Council recommendations had no force of law until notified.

• SRO dated 22.08.2017 did not apply to the petitioner’s contracts.
  Accordingly, demand of differential tax was valid and review petition lacked merit.

Table of Referred Cases

Between Fine Lines

For contractors, the ruling underscores that GST Council recommendations have no effect until notified. Tender conditions fixing liability on the tax rate as of bid submission are binding, even if rates later change. Contractors must account for tax risks while bidding, as retrospective application of reduced rates cannot be claimed unless contracts or law expressly provide.

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