Applicability of GST on Works Contracts entered before the GST Implementation

The Hon'ble Calcutta High Court, in the case of Dipak Sarkar v. The State of West Bengal and Others [WPA/2127/2023 dated September 15, 2023], dismissed the writ petition and held that the assessee is liable to pay the GST on payment received after implementation of the GST regime for the work orders given prior to the implementation of the GST regime. 

Facts

Dipak Sarkar ("the Petitioner") is engaged in the business of providing contractual services to the State Government for executing the works contract.

The Petitioner, aggrieved by the appellate order ("Impugned Order") passed by the Revenue Department ("the Respondent") under the GST Act, contended that Notification No. 5050 – F(Y) dated August 16, 2017 under which Government of West Bengal stated the guidelines regarding issues pertaining to treatment of works contracts entered with the government of West Bengal in the Pre-GST and Post-GST regime, wherein the Notification does not deal with payments made in the post-GST regime in respect to the works contracts or outgoing projects that have been approved before July 1, 2017. 

The Respondent contended that the Contract was executed on August 20, 2018 between the Petitioner and the State Government, and the completion certificate of the work done was issued on July 8, 2023, therefore, no question arises for the applicability of the Pre-GST regime provisions as the Contract was executed and the completion certificate of the work done was issued, after the implementation of the GST.

The Respondent, further contended that numerous opportunities were granted to the Petitioner, but the Petitioner failed to prove the non-applicability of GSTamounting to Rs. 1,90,67,822/- received on the works contract granted and executed after the implementation of the GST Act. Thereby, due to willful misstatement provided by the Petitioner, proceedings under Section 74 of the Central Goods Services Tax Act, 2017 ("the CGST Act") were initiated against the Petitioner. 

Issue

Whether the Petitioner is liable to pay GST on payment received after implementation of the GST Act for the Works contract entered before implementation of the GST Act? 

Held

The Hon'ble Calcutta High Court in WPA/2127/2023, held as under:

• Opined that, the Impugned Order is reasoned and has been passed after taking into consideration all the points raised by the Petitioner. Thus, the Impugned Order is valid and devoid of any error of law.  
• Held that, all the payments regarding the works contract are executed post-GST, making the Petitioner obligated to pay GST on the payment received and tax had to be deposited after filing of the required forms. Hence, the writ petition is dismissed.