The Gauhati High Court has delivered a verdict stating that the railways cannot deny reimbursement of Goods and Services Tax (GST) on account of price variation solely based on the fact that the output tax was paid using the Input Tax Credit (ITC) through an electronic credit ledger.
In a case concerning the construction of a new railway line project, the petitioner, a joint venture, had participated in the tender process and was awarded the contract. The issue at hand revolved around whether the petitioner was entitled to reimbursement of GST on the differential amount of price variation on steel.
The court examined Clause 46A of the Indian Railway Standard General Conditions of Contract, which pertains to the Price Variation Clause (PVC). According to this clause, the PVC is applicable to tenders of specified value and materials supplied by the railways free of charge fall outside its scope. The petitioner argued that the railways had withheld the entire tax component on price variation after the implementation of GST, which was unjust and arbitrary.
The High Court upheld the petitioner's claim, emphasizing that the input tax credit was duly credited to the petitioner's electronic credit ledger. The court dismissed the railways' contention that the petitioner was not entitled to reimbursement of the Input Tax Credit used for payment of the Output Tax Credit, highlighting that such a stance contradicted the framework of the GST Act.
Justice Devashis Baruah, presiding over the bench, ruled in favour of the petitioner, affirming their right to claim the Price Variation Claims (PVC) in accordance with the contract. The court directed the railways to pay the PVC claims based on the contract terms and considering the GST paid by the petitioner.
This ruling sets an important precedent, clarifying that reimbursement of GST on price variation must be honoured by the railways. The decision ensures fairness and compliance with the GST Act, protecting the rights of contractors in similar cases.
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