Petitioner was a registered work contractor and was stated to have executed many work contracts during the pre-GST as well as post-GST period. He claimed to have executed twenty-one contracts for different departments in the Government of Odisha where tenders were invited and estimates made prior to 1st July, 2017 but were completed after 1st July, 2017. On verification it was seen that four numbers of works were completed prior to 1st July, 2017 and the rest of the works were commenced and completed after 1st July, 2017. According to the Petitioner, the Tender Call Notice for all those works were issued in the pre-GST period and the estimated value of contracts arrived based on pre-revised SoR-2014 when the OVAT Act (Odisha Value Added Tax Act) was in operation. Such rates mentioned in SoR-2014 were inclusive of OVAT Act value added tax. Revised SoR-2014 was issued after implementation of GST with effect from 1st July, 2017, the rates prescribed were exclusive of tax components. At the end the estimated value of the contract was reduced. The GST component with applicable rate was required to be added over the contract value. Accordingly, the petitioner contended that a heavy financial burden in the form of a differential tax amount falls on it as the rate quoted was according to pre-revised SoR-2014 prevailing at the time of inviting tenderness.
Bestowing to the State-Opposite Parties, plus the Finance Department, under the GST law, works Contract was subject to tax liability with effect from 1st July, 2017 at the rate of 5% or 12% or 18% of the contract value depending on the nature of contract. The contract value as determined in the pre-GST regime using SoR-2014 was required to be revised For effective implementation of the tax liability.
Consequently, the rates mentioned in SoR-2014 were also revised with effect from 1st July, 2017 since the earlier rates were inclusive of the tax components predominant in the pre-GST era. Correspondingly, guidelines were issued prescribing the mode and manner of calculation of GST in respect of works contract executed after 1st July, 2017, moreover partly or fully. The petitioner complained that the procedure adopted in the preparation of the revised SoR-2014 dated 16th September, 2017 was illegal and contrary to the provisions of OPWD Code (Odisha Public Works Department) and that the rates had not been determined on the basis of actual rates prevailing in different areas of the State.
It was necessary to take note of the fact that the petitioner had filed the present writ petition after receipt of a notice of demand for recovery of excess payment. The notice had been issued under Section 61 of the OGST Act. Thus, the Court refrained from expressing any opinion at this stage on the merits of the said notice and left open all the contentions of the parties in relation thereto to be urged at the appropriate stage in those proceedings.
Since Office Memorandum only prescribed the procedure of calculation to determine the amount of tax in a particular eventuality in the transitional period of migration to GST Act with effect from 1st July, 2017 consequently, the Court found no merit in the petitioners challenge to quash the said Office Memorandum in law.