Karnataka High Court on GST Differential Claims in Construction Contracts: Writ Remedy Not Maintainable
Overview of the Decision
The Karnataka High Court at Bengaluru, comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha, in Writ Appeal No. 2005 of 2025 (GM-TEN), delivered on 11/08/2026, examined whether a contractor could seek reimbursement of additional Goods and Services Tax (GST) through writ proceedings under Article 226 of the Constitution of India.
The appeal, titled Karnataka Residential Educational Institutions Society Vs Sweet Home Constructions, arose from a Single Judge’s order directing reimbursement of a differential GST component claimed by the contractor. The Division Bench set aside the Single Judge’s order, holding that the dispute was rooted in the contract between the parties and therefore not appropriate for adjudication in writ jurisdiction.
While doing so, the Court distinguished earlier precedents such as Sri Chandrashekaraiah and Others v. State of Karnataka and Others, W.P.No.9721/2019 and clarified the limited scope of writ jurisdiction in matters that essentially concern contractual rights and liabilities between a contractor and the employer, even where the employer is a government-controlled entity.
Factual Background
Tender and Contract Details
- The appellant, Karnataka Residential Educational Institutions Society, issued a tender notification on 25.10.2017 for construction of BC Post Metric Girls Engineering Hostel at Karwar, Uttara Kannada District.
- M/s Sweet Home Constructions (respondent No. 1 and writ petitioner) submitted its bid on 08.12.2017 and was declared the successful bidder.
- A formal contract agreement was executed on 28.02.2018.
- As per the agreement, the accepted contract price was:
Rs.3,17,41,000/- (Rupees Three Crore Seventeen Lakhs Forty One Thousand Only) (+1.48% Above the SR 2016-17).
Importantly, this contract came into existence after the implementation of the GST regime on 01.07.2017.
Billing and GST Claim by the Contractor
The contractor raised bills totalling Rs.3,19,97,005/- for the works executed under the contract. In its representation dated 21.11.2024 (Annexure-B to the writ petition), the contractor asserted the following:
- It had discharged GST at the rates of 12% and 18%, aggregating Rs.38,79,278/-.
- The estimate, however, had been prepared based on Schedule of Rates 2016-17, factoring tax at 4%, amounting to Rs.12,99,699/-.
- On this basis, it sought reimbursement of the differential tax:
- Differential GST claimed: Rs.25,99,398/-
- Along with interest.
The contractor’s case was that since the contract was executed after the introduction of GST, and the tax incidence had increased from the estimated 4% to effective rates of 12% and 18%, the incremental burden ought to be reimbursed by the employer.
Proceedings Before the Single Judge
Relief Sought in the Writ Petition
In W.P.No.35531/2024 (GM-TEN), the contractor approached the High Court seeking directions primarily in the nature of mandamus. The prayers included:
- A direction to the respondents to refund the differential GST amount paid by the petitioners for the works executed, in line with the representations dated 21-11-2024.
- Any other relief deemed appropriate in the interest of justice.
Single Judge’s Approach and Findings
The learned Single Judge allowed the writ petition. The key feature of that order was:
- The petition was allowed primarily by following the earlier decision in:
- **Sri Chandrashekaraiah and Others v.