Tax issue in contract

There is a situation in which I need help.

I work for company A which has taken a supply contract from an organisation (B).

In the contract, it has set fixed VAT rates for multiple items like:

Water Cooled CHillers- 13.5%

Heat Exchangers- 12.5%, etc.

 

The contract also mentions that if the tax rates fall below the above mentioned rates at the time of supply, then A can bill B according to the reduced TAX Rate, but if the tax rates rise (as happened for all the items after GST for us) above the mentioned tax rates as present in contract then A shall receive only the rate which is mentioned in the contract. The Bill will mention both Tax Applicable and Tax Reimbursible rates. This is written in the contract.

 

Is this correct? Can B exempt from paying taxes to A based on the contract? Is it not violation of GST law?

Replies (2)
If B refuses to pay entire amount of GST which is higher than VAT in your case you can deny him the claim of Input Tax Credit to the extent he refuses to pay tax.
In this way the contract clause will also be honoured as you will charge him only VAT rate and not GST rate and he will lose the ITC to that extent.

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