The court heard arguments from various parties, including the petitioners, the State’s counsel, and the Assistant Solicitor General representing the Union of India, regarding the implications of the Goods and Services Tax Act (GST Act, 2017) on tenders floated prior to its enactment. The petitions concern the reimbursement of taxes under Clause 35 of the Standard Bidding Document (SBD) and the Model Bidding Document (MBD) used by the Works Departments of the Government of Bihar.
The petitioners assert that they participated in tender processes before the GST Act came into force, under the Bihar VAT Act, 2005. They argue that after the GST Act’s implementation, the Works Department of the Government of Bihar should have amended Clause 35 to address reimbursement for GST liabilities incurred post-implementation. They contend that contracts existed where estimates were prepared and agreements executed before July 1, 2017 (the GST Act’s commencement date), but work continued thereafter. Additionally, there were contracts where estimates were prepared before July 1, 2017, but agreements were executed after, and contracts where both estimates and agreements were made post-implementation. The petitioners claim that Clause 35 needed suitable amendment to align with the GST Act’s provisions.
Clause 35 of the SBD states that tendered rates include all taxes and levies payable under respective statutes. However, if any further tax or levy is imposed after the last stipulated tender receipt date, and the contractor pays it, the contractor should be reimbursed, subject to the Chief Engineer’s discretion. The contractor must maintain relevant records, allow inspections, and notify the Engineer in Charge within 30 days of any additional tax imposition.
The court has yet to rule on the matter, as it requires further deliberation on the petitioners’ contentions and the implications of Clause 35 vis-à-vis the GST Act’s provisions.
In a legal proceeding, the court heard arguments from counsel representing both the petitioners and the state, as well as an Assistant Solicitor General representing the Union of India. The central issue at hand is the impact of the Goods and Services Tax Act (GST Act, 2017) on tenders and agreements made prior to its enactment. Specifically, the concern revolves around Clause 35 of the Standard Bidding Document (SBD) used by the Works Departments of the Government of Bihar, which addresses the reimbursement of taxes imposed after the receipt of tenders.
The petitioners contend that they participated in tender processes before the GST Act came into force, under the purview of the Bihar VAT Act, 2005. However, they argue that after the GST Act was implemented, the Works Department of the Government of Bihar failed to amend Clause 35 to account for GST liabilities. Consequently, the petitioners claim they are being unfairly burdened with GST payments without any provision for reimbursement.
The petitioners highlight various scenarios in their contracts: some were initiated before the GST Act but continued afterward, some had estimates prepared before the GST Act but agreements signed afterward, and others had both estimates and agreements executed after the GST Act. They argue that Clause 35 must be amended to align with the requirements of the GST Act.
Clause 35 of the SBD states that tendered rates should include all applicable taxes and levies. However, if additional taxes are imposed after the tender deadline, the contractor may be reimbursed for those payments, subject to approval by the Chief Engineer. The contractor is required to maintain proper records and provide necessary documentation for any such reimbursements.
During arguments, counsel for the petitioners emphasized that the state government had not established a mechanism for determining and reimbursing GST amounts on works contracts as required by the GST Act. This lack of action forced the petitioners to deposit 12% of each bill as GST without clarity on reimbursement procedures. This situation, they argue, negatively affects contractor profits, as they are compelled to deposit more than the approved 10% contractor profit due to GST obligations.
Overall, the petitioners seek relief from the court to rectify the situation, arguing that the state government’s inaction has placed an undue financial burden on them and has compromised their contractual rights and profitability.
The court heard arguments from the petitioners’ counsel, as well as representatives for the State and the Union of India, regarding the implications of the Goods and Services Tax Act (GST Act, 2017) on tenders issued prior to its enactment. The issue at hand revolves around Clause 35 of the Standard Bidding Document (SBD) and the Model Bidding Document (MBD), which address the reimbursement of taxes or levies imposed after tender submission.
The petitioners contend that they participated in tender processes before the GST Act came into force, under the Bihar VAT Act, 2005. They argue that post-GST implementation, the Works Department of the Government of Bihar should have amended Clause 35 to ensure reimbursement of GST liabilities incurred by contractors. They claim that contracts span various scenarios: some with estimates prepared and agreements executed pre-GST, some with estimates pre-GST but agreements post-GST, and others entirely post-GST, necessitating Clause 35’s amendment to comply with the GST Act.
Clause 35 states that if any new tax or levy is imposed after the tender submission deadline, contractors may be reimbursed for payments made, provided such payments aren’t due to delays within their control. Contractors must keep records and notify the Engineer in Charge of any new taxes within 30 days.
The petitioners argue that the State Government has not established a mechanism to determine GST payable on contracts falling into the aforementioned categories. They highlight the lack of clarity regarding who is responsible for deducting and remitting GST, leading contractors to deposit 12% of bill amounts without a clear refund process. This, they argue, adversely affects contractor profits.
They point out that while the Water Resources Department formulated a GST provision for works contracts, the Commercial Taxes Department has yet to approve it. Consequently, they seek a court directive to remove Clause 35 and replace it with provisions for post-GST reimbursement, along with instructions for refunding GST payments from contractors’ running accounts. They also request a mandamus to revise the SBD’s schedule of rates for GST compliance.
In summary, the petitioners argue for amendments to Clause 35 to accommodate GST implications on contracts, citing the State Government’s failure to establish a clear mechanism for GST reimbursement, which adversely affects contractors’ profits. They seek court intervention to rectify these issues.
