State is obligated to reimburse differential GST burden incurred by government contractor post-regime change.
Issue
Whether a government contractor who incurred and paid additional GST liability due to the transition from the VAT regime to the GST regime during an ongoing contract is entitled to reimbursement of the differential tax amount from the State.
Facts
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Contract Awarded: The petitioner, a Class-I contractor, was awarded a works contract by the State government under the pre-GST regime.
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Tax Transition: During the execution of the contract, the GST regime came into force, replacing the prevailing Value Added Tax (VAT) framework.
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Additional Tax Paid: The introduction of GST increased the petitioner’s tax burden, which the contractor duly discharged with the tax authorities.
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Reimbursement Denied: The petitioner submitted a representation seeking reimbursement of the differential GST amount, but the respondent authorities failed to take any action.
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Writ Petition Filed: Faced with inaction, the petitioner filed a writ petition seeking a writ of mandamus directing the State to reimburse the additional tax liability attributable directly to the introduction of GST.
Decision
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Settled Law: Held, yes. The issue of liability to bear differential tax arising post-GST implementation is no longer res integra; consistent judicial precedents establish that the recipient of services is liable and the State is obligated to reimburse such tax.
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Legal Right to Reimbursement: Held, yes. By paying the differential GST, the petitioner acquired a clear legal right to seek reimbursement from the respondents, who were the ultimate beneficiaries of the contract work.
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Writ Allowed: Held, yes. The writ petition was allowed, and the respondents were directed to consider the petitioner’s representation, determine the differential GST payable, and reimburse the amount confined to the liability directly attributable to GST introduction, subject to proper verification.
Key Takeaways
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State Obligation on Regime Transition: When statutory tax structures change mid-contract (e.g., VAT to GST), the financial burden of additional indirect taxes falls on the State/work recipient.
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Right to Reimbursement: Government contractors who bear differential tax liabilities post-GST implementation possess an enforceable legal right to claim reimbursement from contracting state departments.
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Scope Restricted to Direct GST Impact: Reimbursement claims must be verified and strictly confined to the additional tax liability directly resulting from the statutory transition to GST.
HIGH COURT OF KARNATAKA
Anil Annasaheb Patil
v.
Executive Engineer Pwd
Sachin Shankar Magadum, J.
WRIT PETITION NO. 102334 OF 2026 (GM-RES)
AUGUST 10, 2026
Sangram S. Kulkarni, Adv. for the Petitioner. Sharad V. Magadum, AGA for the Respondent.
ORDER
Sachin Shankar Magadum, J.- The petitioner is seeking mandamus directing the respondents to reimburse the differential Goods and Services Tax (for short ‘GST’) amount of Rs.5,68,578.33 with interest at the rate of 18% per annum from the date of remittance till realization in terms of representation dated 19.11.2025 as per Annexure-F.
2. Heard learned counsel for the petitioner and learned Additional Government Advocate appearing for respondents-State. Perused the records.
3. The petitioner, a Class-I Government Contractor, was entrusted with the construction work of “Court Complex building at Mudalgi”. It is the specific case of the petitioner that during the currency of the contract, the Goods and Services Tax (GST) regime came into force with effect from 01.07.2017, replacing the earlier Value Added Tax (VAT) regime. Consequent upon such introduction of GST, the petitioner was required to bear additional tax liability and, therefore, claims reimbursement of the differential tax amount from the respondents-State.
4. The controversy relating to liability to bear the differential tax consequent upon introduction of GST is no longer res integra. In an identical matter in M.G. Arunkumar v. State of Karnataka (Karnataka)/W.P.No.104908/2023, disposed of on 29.08.2023, this Court has held that the recipient of the works contract service is liable to bear the differential tax liability arising on account of introduction of GST. This Court has further held that the State, its instrumentalities and Departments are under an obligation to reimburse the differential GST amount payable by the contractor.
5. In the present case, the petitioner has already discharged the differential GST liability before the competent authority. Alleging inaction on the part of the respondents in reimbursing the said amount, the present writ petition is instituted. In view of the consistent line of decisions rendered by this Court on the issue, the petitioner has acquired a corresponding legal right to seek reimbursement of the differential GST amount. The respondents, being beneficiaries of the work executed by the petitioner and in view of the law laid down by this Court, are under a bounden duty to reimburse the differential GST amount. Therefore, this Court is of the view that the petitioner has made out a case for issuance of a writ of mandamus.
6. For the foregoing reasons, this Court proceeds to pass the following:
ORDER
| (i) | The writ petition is allowed. |
| (ii) | The respondents are directed to consider the representation dated 19.11.2025 (Annexure-F) and determine the differential GST amount payable to the petitioner in accordance with law. |
| (iii) | Upon such determination, the respondents shall reimburse the differential GST amount to the petitioner within a period of six weeks from the date of receipt of a certified copy of this order, if the representation of the petitioner is not decided as on today. |
| (iv) | It is made clear that the reimbursement shall be confined only to the differential tax liability attributable to the introduction of the GST regime and shall be subject to verification of records and calculations in accordance with law. |