Builders Association Of India Indore Centre Indore VS State Of Madhya Pradesh

The Builders Association of India, represented by its Chairman from the Indore Centre, has filed a writ petition seeking a directive for the respondents to review and decide upon their representation dated January 2, 2021 (Annexure-P/6) within a two-month timeframe.

In the petition’s statement of facts, it is outlined that the petitioner is an association comprised of builders and contractors, officially registered under the Societies Registration Act of 1860. The members of this association have been actively engaged in various construction projects for departments and local bodies within the State of Madhya Pradesh. These projects span across entities such as the Water Resource Department, Public Works Department, M.P. Housing Board, Municipal Corporation, Panchayat Development Authorities, MPAKVN, and Bridge Corporation, among others.

The crux of the matter lies in the timeline of tax regimes. Prior to the implementation of the Goods and Services Tax (GST) Act in 2017, the members of the petitioner-Association were operating under the VAT (Value Added Tax) regime of 2002. Construction services were explicitly excluded from service tax during this period, resulting in the members solely paying VAT for their construction activities.

However, with the introduction of GST on July 1, 2017, the tax landscape changed significantly. Post-GST, the members of the association found themselves now obligated to pay GST for their construction works, a shift from the earlier VAT-only regime. This change has brought forth financial implications and complexities for the petitioner-Association’s members.

In light of these circumstances, the Builders Association of India has petitioned the court to intervene, urging the respondents to expedite the consideration and resolution of their representation. They seek a decision on this matter within a span of two months, highlighting the challenges and adjustments their members have faced due to the transition from VAT to GST in the construction sector.

The Builders Association of India, represented by its Chairman from the Indore Centre, has filed a writ petition seeking a directive for the respondents to review and decide upon their representation dated 02.01.2021 within two months.

The petition outlines that the petitioner is an association comprising builders and contractors, legally registered under the Societies Registration Act, 1860. Its members have been actively engaged in executing projects for various departments and local bodies in the State of Madhya Pradesh, including the Water Resource Department, Public Works Department, M.P. Housing Board, Municipal Corporation, Panchayat Development Authorities, MPAKVN, and Bridge Corporation.

Prior to the implementation of the Goods and Services Tax Act, 2017 (GST) on 01.07.2017, the members of the petitioner-Association were operating under the Value Added Tax (VAT) regime of 2002. Construction services were part of the negative list for service tax, so the members were only liable to pay VAT. However, with the introduction of GST, the members are now required to pay GST, which the petitioner argues results in a higher tax burden.

Mr. Shekhar Sharma, the petitioner’s counsel, has argued that the difference between GST and VAT amounts to approximately 8 to 10 percent more. This increased tax burden under the GST regime has severely impacted the business activities of the construction trade, leading some members of the petitioner-Association to halt their work. Despite substantial progress on projects, when bills were submitted to the respondent-Department, payments were made without deducting taxes as initially quoted during the tender process.

In essence, the petition highlights the financial strain imposed on the builders and contractors due to the transition from VAT to GST, leading to business disruptions and stalled projects. The petitioner seeks a resolution to this issue by requesting the respondents to address their representation promptly within the stipulated two-month period.

This writ petition, filed by the Builders Association of India through its Chairman in Indore, requests a directive to consider and decide on their representation from January 2, 2021, within two months. The petitioner, an association of builders and contractors registered under the Societies Registration Act, 1860, comprises members involved in various projects for departments and local bodies in Madhya Pradesh such as the Water Resource Department, Public Works Department, M.P. Housing Board, Municipal Corporation, and more.

Before the enactment of the Goods and Services Tax (GST) Act in 2017, these members operated under the VAT regime of 2002. Service tax for construction work was previously on a negative list, so only VAT was paid. However, post-GST, members now face the burden of GST, which is approximately 8 to 10 percent higher than VAT. This tax shift has severely impacted their business activities, with some forced to halt work. Despite substantial progress on projects, when bills were submitted to the respondent department, payments were made without deducting taxes as per tender quotes.

Additionally, before July 1, 2017, TDS (Tax Deducted at Source) was deducted as per the previous tax regime. However, post-GST, no TDS deductions are being made from running bills. The petitioner argues that since all agreements were executed before July 1, 2017, there is no clear direction on TDS deductions under GST for pending contracts.

The petitioner highlights that the M.P. Urban Development Corporation Limited, under the Ministry of Urban Development and Housing Development, Government of M.P., in its order dated August 19, 2020, delegated powers to make payments for additional liabilities arising from GST implementation in contracts related to ADB and World Bank Aided Projects bid before July 1, 2017. A similar Standard Operating Procedure (SOP) was issued by the M.P. Road Development Corporation Limited on December 18, 2020, to address GST payment claims.

The petitioner’s counsel argues that contractors working with these corporations are in a similar situation to those in other departments. As these corporations are owned and controlled by the State Government, the contractors expect similar treatment regarding GST implications. They seek clarity and consistency in the application of GST to contracts entered into before July 1, 2017, citing precedents set by the aforementioned orders from the Urban Development and Road Development Corporations.

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