Allahabad High Court Quashes GST Proceedings Against Contractor for Pre-GST Payments

Court directs refund of deposited amounts with interest, affirming VAT jurisdiction over payments for work done prior to GST implementation.

In a significant judgment dated November 17, 2025, the Allahabad High Court has set aside proceedings initiated by GST authorities against M/s. Vimlesh Kumar Contractor. The proceedings sought to levy tax, interest, and penalties on payments received post-GST implementation for work completed during the VAT period. The court ruled that GST authorities exceeded their jurisdiction by attempting to levy charges on payments related to work contracts executed before the Goods and Services Tax (GST) regime came into effect.

Justice Piyush Agrawal presided over the case, hearing arguments from Aditya Pandey and Shailendra Kumar Tripathi, counsel for the petitioner, and opposing counsel from the State of Uttar Pradesh. The petitioner challenged orders dated January 21, 2025, and April 28, 2024, which imposed tax liabilities for the fiscal year 2018-19, citing discrepancies between figures reported in GSTR-3B and Form 26AS.

The court acknowledged that the petitioner, a registered GST entity involved in work contracts, received payments for services rendered to UP Jal Nigam during the assessment years 2015-16 and 2016-17. These payments, made after the GST regime began, were initially taxed under the VAT system, with Jal Nigam deducting VAT at 4% at the time of payment.

Despite these deductions, the GST authorities initiated proceedings, assuming jurisdiction based on discrepancies in tax returns. The court found this assumption flawed, noting the absence of any GST Act provision allowing taxation on payments for work completed during the VAT period. The judgment emphasized that the original records confirmed the petitioner’s work contracts for the relevant assessment years and criticized the GST authorities for not conducting due diligence with the VAT assessing authority.

Justice Agrawal stressed the importance of jurisdictional boundaries, stating that the proceedings were not sustainable under the current legal framework. Consequently, the court quashed the impugned orders, directing the authorities to refund any deposited amounts with interest within one month upon presentation of the certified judgment copy.

This decision underscores the legal complexities surrounding transitional tax regimes and reinforces the demarcation between VAT and GST jurisdictions. Legal experts suggest that this judgment will serve as a precedent for similar cases, ensuring that contractors are not unjustly penalized for payments received after new tax regimes are instituted.

Bottom Line:

GST authorities cannot levy tax, penalty, or interest under the GST regime for payments received for work done prior to the implementation of GST, as it pertains to the VAT period.

Statutory provision(s): Goods and Services Tax Act, 2017 Section 73

M/s. Vimlesh Kumar Contractor v. State of U.P., (Allahabad) : Law Finder Doc Id # 2811289