Liability to pay GST is on supplier, a contrary condition in work order is void

Non payment of GST on the basis of condition in work order that GST will be paid by the purchaser of the goods, amounted to short payment

In a recent judgment, Hon’ble Allahabad High Court held that liability to pay the GST is on the supplier & non payment of GST merely on the basis of condition in the work order that GST will be paid by the purchaser of the goods amounted to short payment as there was no RCM notification in this regard.

ABCAUS Case Law Citation:
4516 (2025) (04) abcaus.in HC

In the instant case, the assessee/supplier had filed a Writ Petition challenging the order passed by the GST Authority under Section 73(9) of the Goods and Services Tax Act, 2017 (‘the Act’) demanding GST short paid.

The Petitioner was a supplier who had made taxable supplies. The purchaser in the Work Order issued, had agreed to pay the GST. However, the GST was not paid by the purchaser.

The petitioner was issued a show cause notice under Section 73 of the Act on account of non-payment of GST. The Petitioner filed a reply indicating that as the purchaser as a condition of the Work Order had agreed that he will deposit the GST, the petitioner cannot be called upon to deposit the same.

However, the GST Authority came to the conclusion that the action of the petitioner in not depositing the same, based on purported agreement between the parties, amounted to short tax paid and consequently passed the order impugned.

Before the Hon’ble High Court, the petitioner made submission that the petitioner and the supplier had agreed in the work order that GST will be paid by the purchaser. The Petitioner placed reliance on the provisions of Section 9 of the Act emphasizing that reverse charge mechanism is permissible and therefore, the action of the GST authorities in demanding the due GST from the petitioner cannot be sustained.

The Department submitted that there is no notification issued under Section 9 of the Act dealing with the subject matter of the present transaction under Reverse Charge Mechanism (RCM) and therefore, the plea raised in this regard had no substance.

The Hon’ble High Court observed that the petitioner failed to indicate any notification issued under Section 9 of the Act having application of RCM to the supplies in question and therefore, the plea sought to be raised based on the agreement between the parties cannot be countenanced.

The Hon’ble High Court opined that the indication made in the agreement between the parties can be enforced by the petitioner against purchaser, however, insofar as respondent State is concerned, the liability to pay the GST is that on the supplier i.e. the petitioner and therefore, the plea raised in this regard had no substance.

Accordingly, the Petition was dismissed.

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