Government Contractors Entitled to GST Reimbursement Under Post-GST Contract Provisions Despite Misapplied Pre-GST Rules

By | October 12, 2026
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Government Contractors Entitled to GST Reimbursement Under Post-GST Contract Provisions Despite Misapplied Pre-GST Rules

Issue

Whether government authorities can deny GST reimbursement to a contractor for post-July 1, 2017 works contracts by misapplying provisions meant for pre-GST contracts under a state notification.

Facts

  • Contract Execution: The petitioner (a registered contractor under CGST/WBGST) executed works contract services after July 1, 2017, paying the applicable GST from their own funds against gross bills for the financial years 2017-18 and 2018-19.
  • Reimbursement Denied: When the petitioner sought reimbursement and wrote letters in 2019, the respondents denied the claim, relying on paragraph 3(iv) of Notification No. 5050-F(Y) dated August 16, 2017.
  • Petitioner’s Argument: The petitioner contended that paragraph 3(iv) applies exclusively to pre-GST legacy contracts, whereas post-GST contracts are governed by paragraph 4 of the same notification.

Decision

  • Misconstruction of Notification: The respondents misconstrued the notification by invoking paragraph 3(iv)—which is strictly confined to pre-GST contracts—to deny reimbursement for post-July 1, 2017 agreements that fall under paragraph 4 [In favour of assessee/Matter remanded].
  • Reconsideration Directed: Since the petitioner had borne the GST burden on gross bills for 2017-18 and 2018-19, the competent authority was directed to reconsider the reimbursement claim in accordance with paragraph 4 and issue a speaking order after granting a hearing [In favour of assessee/Matter remanded].

Key Takeaways

  • Applicability of Transition Rules: State notifications governing tax regime changes must be applied strictly according to their structural divisions, ensuring post-GST contracts are evaluated under provisions designed for them rather than legacy clauses.
  • Burden of Indirect Taxes: Government contractors who pay GST out of pocket on gross bill values for post-change contracts are entitled to legitimate reimbursement where contractual provisions permit.
HIGH COURT OF CALCUTTA
Manash Ghosh
v.
State of West Bengal
Smita Das De, J.
W.P.A. No. 18515 of 2021
IA No. CAN 1 of 2026
SEPTEMBER  15, 2026
Avra Majumdar, Arindam Das, Ms. Alisha Das, Ms. Rupomita Ghosh and Md. Bani Israil for the Petitioner. Nikunj Berlia, Shounak Ghosh and Ms. Anyasha Das for the Respondent.
ORDER
1. The petitioner seeks a mandamus directing inter alia, the respondents to remit the amount of the GST on Works Contract Services provided on or after July 1, 2017. The petitioner in the instant case is the sole proprietorship firm registered under the CGST Act and WBGST Act.
2. The case made out by the petitioner is that the respondent authorities have failed to appreciate that paragraph 3(iv) of the Notification is confined in its application to Pre-GST contracts and cannot be invoked to deny reimbursement in respect of contracts executed after July 1, 2017 which are expressly governed by paragraph 4 of the very same Notification.
3. It is further submitted that the action of the respondent in denying GST reimbursement to the petitioners is arbitrary, unreasonable and discriminatory violating the mandate of the Article 14 of the Constitution of India which is contrary to the principle of equality before the Law and equal protection of the Laws.
4. The Learned Advocate for the petitioner relies upon a judgment of this Hon’ble High Court in the case of Sushil Kumar Thard v. National Jute Manufactures Corporation Ltd. [WPA No. 4751 of 2023, dated 27-9-2023] which was subsequently affirmed by the Hon’ble Supreme Court in the case of Sushil Kumar Thard (supra) wherein it has been held that even on contractual matters, the State and its instrumentalities are bound to act fairly, reasonably and in a non-arbitrary manner. The learned Advocate for the petitioner relies upon a judgment passed in Mridula Paul v. Executive Engineer WBSRDA [WPA No. 213287 of 2023].
5. The learned counsel for the State is unable to contradict the submissions made by the petitioners.
6. Having heard both the parties and considering the materials available on record I am of the view that as per the notification dated August 16, 2017, the question of revision of any contractual values of the contract due to impact of change of tax rate with regard to VAT/Service Tax to GST does not arise at all.
7. From the plain reading of the paragraph 4 of the Notification in question it clearly envisages that:
” With regard to post-GST contracts or ongoing project where estimates have been approved before 1st of July 2017 then in those work order can be given for supply of goods or service or both work contract, GST rates will be applicable. In other words the suppliers of goods/services or both has to pay WBGST and CGST on all taxable goods/services.”
8. In the light of the above Notification, the respondent authority has misconstrued the applicability of the Notification in the context of the instant case. The respondents have failed to appreciate that paragraph 3(iv) of the Notification is confined in its application to pre-GST contract and cannot be invoked to deny reimbursement in respect of contracts executed after July 1, 2017 which are expressly governed by paragraph 4 of the same notification.
9. In view of the aforesaid, this court directs the respondent no. 2, The Principal Secretary, to Public Works Department to revisit the issue of the petitioner as mentioned in the letters dated January 09, 2019, January 10, 2019, May 02, 2019 and May 10, 2019 respectively with regard to the payment of the GST amount against the gross bill during the period from 2017-18 & 2018-19 as per GST Law. However, it is made clear that this court has not gone into the merits of the case but since the petitioner has already made payment of the GST amount against the gross bills for the period 2017-18 & 2018-19 out of their own pocket, hence, this court directs the respondent no. 2 to consider the issue of reimbursement of the GST component in light of paragraph 4 of the Notification dated August 16, 2017 being Notification No. 5050-F(Y) and shall pass a reasoned and speaking order in accordance with law upon giving opportunity of personal hearing to the petitioner preferably within a period of six weeks from the date of communication of the order. Till the final decision is taken by the respondent no. 2, no coercive action can be taken against the petitioner.
10. With the above observations and directions, the writ petition being WPA 18515 of 2021 along with CAN 1 of 2026 are disposed of. No order as to costs.
11. Urgent certified copy of this order, if applied for, be supplied to the parties upon compliance with all requisite formalities.