Kerala High Court Rules Out Double Taxation: KVAT Component Adjusted Before GST Addition in Contractor Bill Settlement
Case Overview
Case Name: D. Sureshbabu Vs Kerala State Electricity Board Ltd.
Court: Kerala High Court
Appeal Number: WP(C) No. 23893 of 2020
Date of Order: 10/07/2026
Background and Facts of the Case
An A Class Government contractor entered into agreements with the Kerala State Electricity Board (KSEB) for undertaking three civil works, evidenced through three separate work orders. The first work order carried the date 31.5.2017, the second was issued on 3.8.2017, and the third was dated 30.8.2018. While the official commencement date of the first work order appeared to be 31.5.2017, documentary evidence on record established that the actual ground-level work commenced only on 25.8.2017.
During the pendency of these works, India's indirect tax landscape underwent a fundamental transformation. The pre-existing regime of Value Added Tax (VAT) and Service Tax was subsumed under the unified Goods and Services Tax (GST), which became operational with effect from 1.7.2017. This transition formed the crux of the dispute that subsequently arose between the assessee-contractor and the KSEB.
Upon completion of all three works and submission of the respective contract bills, the assessee alleged that the KSEB had unlawfully deducted amounts attributable to Kerala Value Added Tax (KVAT) from the bills while simultaneously recovering GST on the same transactions. This dual deduction, the assessee argued, amounted to unconstitutional double taxation and was therefore illegal and arbitrary. The assessee challenged the impugned order Ext.P9 on these grounds before the Kerala High Court by way of a writ petition.
Contentions Raised by the Assessee
The assessee's primary argument rested on the premise that since all three works — including the one where the work order predated GST — were effectively completed after 1.7.2017, the entire tax liability arising from these contracts ought to be governed exclusively by the provisions of the Goods and Services Tax (GST) Act, 2017. No residual liability under KVAT or any other State-level tax could legitimately survive post-GST implementation.
The assessee further submitted that the KSEB had:
- Recovered amounts corresponding to KVAT from the submitted contract bills
- Simultaneously collected GST on the same contract value
- Thereby subjected the assessee to double taxation — once under KVAT and once under GST
On this basis, Ext.P9 was challenged as being illegal, arbitrary, and contrary to the statutory framework governing indirect taxation in the post-GST era.
Respondent's Stand Before the Court
The KSEB filed a detailed counter affidavit disputing the assessee's characterization of events. The respondent's position rested on the following key arguments:
Regarding Compliance with GST Provisions
The KSEB categorically stated that the settlement of all three bills and the consequent release of payments were carried out strictly in accordance with the statutory provisions of the GST regime. No separate recovery was made towards VAT work contract tax or Service Tax, according to the respondent.