Madras HC Orders Fresh GST Assessment: Contractor May Prove Pre-2022 Work to Avoid 18% Tax

The Madurai Bench of the Madras High Court, in a ruling on the applicable GST rate for a works contract completed before the 2022 rate revision, directed the department to reassess the demand based on the evidence submitted.

The petitioner, V. Janarthanan, a contractor, challenged an assessment order issued under Section 74. The department raised a demand claiming that tax was paid at a rate of 12% instead of the required 18%, citing Notification No. 03/2022-Central Tax (Rate) dated July 13, 2022.

As per the applicant, the works were finished in 2020 before the amendment in tax rate, and that merely the invoice was been raised belatedly in July 2022 to regularise records. Based on the same, the change of differential tax at 18% was not justified.

As per the state, the applicant has been provided a chance to verify his claim, though unable to provide the supporting documents, thereby explaining the assessment order.

As per the court, the facts have been analysed, citing that the demand for the other defects has fallen, and there is only the dispute over the tax rate.

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Before the effective date of the notification of the enhanced GST rate from 12 to 18 per cent, whether the Work was finished was the main issue, Justice C. Saravanan cited.

Reconsideration is needed in the case, the court said, it quashes the impugned order insofar as it is pertinent to the higher tax rate. The department must do the assessment again after giving the applicant a chance to file the documentary proof that the works were finished before July 2022.

As per the High Court, if the applicant is not able to provide the proof that is needed, the department can reconfirm the demand.

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Towards the penalty levied u/s 74, the court left it open for the applicant to contest the same after a fresh final order is passed.