HC Orders Segregation of Pre- and Post-GST Works for Correct Tax Application

Case Details: Mycon Construction Ltd. vs. State of Karnataka - [2025] 180 taxmann.com 352 (Karnataka)

Judiciary and Counsel Details

• M. Nagaprasanna, J.
• D.R. Ravishankar, Ld. Sr. Counsel & Naveen G.S., Adv. for the Petitioner.
• M. Rajakumar, Learned AGA & Dakshina Murthy, Adv. for the Respondent.

Facts of the Case

The petitioner, engaged in executing works contracts for construction projects. It was contended that certain works contracts executed by it spanned both pre-GST and post-GST periods. It was argued that post-GST agreements incorrectly applied pre-GST service tax, leading to a miscalculation of tax liability. Segregation of pre-GST and post-GST works, adjustment of Karnataka Value Added Tax (KVAT)/service tax for pre-GST works, application of GST with ITC offset for post-GST works, and reimbursement of differential tax for pre-GST works paid were sought after the implementation of GST. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the petitioner was entitled to get relief by segregating pre-GST works from post-GST works. The Court directed that payments for pre-GST works were to be identified, and KVAT/service tax applicable thereon was to be deducted, while GST was to be applied to post-GST works with ITC offset against output GST. The Court further held that a supplementary agreement was required to document the differential computation and directed reimbursement of the differential tax for pre-GST works that were paid after the implementation of GST.

List of Cases Reviewed

• Chandrashekaraiah v. State of Karnataka [2024] 158 taxmann.com 443 (Karnataka) (para 8) followed

List of Cases Referred to

• Chandrashekaraiah v. State of Karnataka [2024] 158 taxmann.com 443 (Karnataka) (para 7)
• M.G. Arunkumar v. State of Karnataka [2024] 165 taxmann.com 302 (Karnataka) (para 7).