Karnataka High Court Modifies GST Reimbursement Direction: Only Representation to Be Examined
Background of the Dispute
The Division Bench of the Karnataka High Court was called upon to decide a writ appeal filed by the State authorities under Section 4 of the Karnataka High Court Act, 1961. The appeal challenged an order dated 26.03.2025 passed by a learned Single Judge in W.P. No.569/2024.
In the writ petition, the assessee (petitioner before the Single Judge) had approached the Court seeking:
- A direction to consider his representation dated 04.12.2023 for release of the GST amount in terms of the provisions of the GST laws.
- A declaration that the provisions of the GST Act would not apply to works contracts where the services had been rendered prior to 01.07.2017, insofar as the assessee was concerned.
The learned Single Judge, instead of merely directing consideration of the representation, allowed the writ petition by following the earlier decision in Sri. Chandrashekaraiah and others v. State of Karnataka – W.P. No.9721/2019 and connected cases, dated 11.04.2023, and ordered reimbursement of the GST amount to the assessee.
The State authorities, aggrieved by this direction for direct reimbursement, preferred the present writ appeal.
Order of the Single Judge Under Challenge
In the impugned order, the Single Judge had disposed of the writ petition in the following terms, based entirely on Chandrashekaraiah:
“i. The petition is allowed and disposed of in terms of the order passed by this Court in the case of Sri. Chandrashekaraiah and others Vs. The State of Karnataka – W.P.No.9721/2019 and connected cases dated 11.04.2023.
- The concerned respondents are hereby directed to reimburse GST amount as indicated in the representations at Annexures- C1 to C7 back to the petitioner, within a period of three months weeks from the date of receipt of a copy of this order.”
Thus, instead of confining itself to directing consideration of the representation, the Single Judge extended the ratio of Chandrashekaraiah and mandated direct reimbursement of the GST amount mentioned in Annexures C1 to C7, within a prescribed time.
Arguments Before the Division Bench
Submissions on Behalf of the State
The learned Additional Government Advocate, Sri. Adithya Vikram Bhat, representing the appellants/State, relied heavily on subsequent decisions of Co-ordinate Benches of the High Court which had examined and clarified the scope of Chandrashekaraiah.
Two decisions were specifically cited:
W.A. No.1587/2023 dated 10.06.2026
In this matter, a Co-ordinate Bench had clarified that any direction in Chandrashekaraiah regarding reimbursement of differential tax could not be read as a mandate to the tax authorities. Instead, such directions were to be restricted to the employers (i.e., contract-awarding entities) and not to the State/tax authorities as such.State of Karnataka and others v. Unique Constructions and others, W.A. No.615/2025
This decision examined the implications of Chandrashekaraiah in detail and significantly narrowed its operative effect. The State argued that this subsequent clarification rendered the Single Judge’s direction for reimbursement legally untenable.
Relevant Observations from Unique Constructions Case
In State of Karnataka and others v. Unique Constructions and others, W.A. No.615/2025, the Co-ordinate Bench set down important findings in paragraphs 9, 10, and 11, which were reproduced in the present judgment. These may be summarised as follows:
1. Limited Scope of Relief (Para 9)
The Co-ordinate Bench in Unique Constructions noted that the challenge in that appeal was focussed on two aspects:
- The operative part of the earlier order sought to import directions from **Sri.