Introduction:

In Ojas Construction through its Partner Rachna Pathak vs. The State of Madhya Pradesh (W.P. No. 39844 of 2025, decided on 17.11.2025), a Division Bench of the Madhya Pradesh High Court comprising Justice Vivek Rusia and Justice Pradeep Mittal examined whether a builder executing a government works contract could claim reimbursement or refund of the differential 6% GST that arose due to the increase of GST on works contract services from 12% to 18%, effective July 18, 2022. The petitioner-builder had been awarded a contract for construction of a dam and canal under the Dharampura Jalashay Yojna, and the agreement was executed on August 17, 2022—by which date the revised 18% GST rate was already in force pursuant to the 47th GST Council Meeting, Notification No. 03/2022 (Rate) dated July 13, 2022, and CBIC Circular No. 177/09/2022-TRU dated August 03, 2022. Despite this, the builder submitted a representation seeking reimbursement or upward revision on the ground that the earlier base contract contemplated 12% GST. The Court, however, focused on the contractual terms and the doctrine of sanctity of contracts, noting that the agreement expressly provided only for downward revision of GST (in Clause 25.3) and was silent on any mechanism for upward revision. It held that once parties have consciously agreed to terms, no enhancement can be claimed later unless explicitly provided for in the contract.

Arguments:

On behalf of the petitioner, Advocate Rakesh Dwivedi argued that the GST rate applicable to government works contracts had been increased from 12% to 18% based on the recommendation of the 47th GST Council Meeting and subsequent notification. It was contended that since the rate rationalization occurred under statutory mandate, the contractor should not be compelled to bear the financial burden of the increased tax. The petitioner emphasized that the original tender was floated when GST on such works was 12%, and therefore any escalation arising from change in statutory tax rates must either be reimbursed or adjusted. The petitioner also argued that government contracts must reflect the realities of taxation law, and failure to align contractual payments with changed GST liabilities would result in unjust enrichment of the State, as the government would benefit from infrastructure creation without compensating the contractor for increased tax obligations imposed after the bidding stage. The petitioner further stated that it had represented to the government promptly and acted bona fide, and that the principle of fairness in administrative decisions warranted relief.

Conversely, on behalf of the State, Government Advocate Rajvardhan Dutt Padraha argued that the contract executed on August 17, 2022, was entered into after the enhanced GST rate had already been notified. Therefore, the contractor was fully aware of the applicable tax regime at the time of signing the agreement. The State submitted that Clause 25.3 of the contract explicitly provided only for reduction of GST—meaning that if GST rates were to be reduced at any stage, the reduced amount would be recovered from the contractor. The contract, however, did not contain any provision enabling reimbursement for upward revision, which indicated the clear intention of the parties to restrict tax adjustment only to the benefit of the State. The respondent argued that a court cannot rewrite, modify, or expand a contractual term under the guise of judicial review, particularly in fiscal and commercial matters governed by explicit contractual arrangements. The State also argued that government tenders operate within strict financial parameters, and allowing unilateral reimbursement without a contractual mandate would distort public finance norms, compromise tender fairness, and set an unsustainable precedent for future contractors. It further submitted that the representation made by the petitioner had no legal basis, and the writ petition was not maintainable as it sought a contractual alteration.

Judgment:

The High Court dismissed the petition, holding unequivocally that the petitioner was not entitled to reimbursement or enhancement of the GST component. The Bench observed that the contract was executed after the GST hike had already taken effect, leaving no ambiguity regarding the applicable rate. The central basis of the judgment was Clause 25.3, which explicitly provided only for recovery in case of reduction of GST rates. The Court interpreted this as a deliberate contractual choice—if the parties intended both upward and downward revision mechanisms, such intention would have been expressly stated. The absence of such a clause, coupled with the presence of a one-sided reduction clause, was held to be conclusive against the contractor. The Court reiterated that terms of a bipartite contract cannot be altered by judicial intervention unless there is illegality, arbitrariness, or violation of public policy—none of which were present. The Bench noted that the petitioner voluntarily entered the agreement with full knowledge of the increased tax rate, thereby waiving any claim for reimbursement. Furthermore, the Court held that the GST Notification and the CBIC Circular did not create any independent statutory right for contractors to seek reimbursement; they merely clarified the applicable rate and operational aspects. The Court emphasized that fiscal changes by the GST Council do not automatically rewrite private or government contracts, and any adjustment requires explicit contractual incorporation. Accordingly, the writ petition was dismissed.