Court holds that pre-bid clarifications cannot override tender terms; denying GST reimbursement violates Article 14’s principle of equality
In a significant judgment delivered on July 16, 2026, the Bombay High Court (Nagpur Bench, Division Bench) allowed the writ petition filed by M/s Indu Construction, a proprietorship firm engaged in construction, against the Nagpur Improvement Trust and others, directing the respondents to reimburse the Goods and Services Tax (GST) paid by the petitioner on an ongoing construction contract.
The dispute arose from Tender No. 1 dated June 2, 2014, concerning the construction of affordable housing in Nagpur. M/s Indu Construction was awarded the contract on August 25, 2014, and completed the work successfully. However, the GST regime was introduced later on July 1, 2017, during the execution of the contract. The petitioner claimed reimbursement for the GST paid on the contract, supported by a Chartered Accountant’s verification certificate dated June 28, 2022. Despite this, the respondent authority denied the claim by communication dated December 20, 2022, relying on certain clauses in the tender documents and pre-bid meeting clarifications which stipulated that any new taxes post contract award would be borne by the contractor without reimbursement.
The Court meticulously examined the clauses relied upon by the respondents—Clause 25 and Clause 48—which stated that the offered rates were inclusive of all applicable taxes and no extra payment would be made. The Court held that these clauses referred to taxes applicable at the time of tender submission in 2014 and could not be interpreted to include future taxes like GST, which came into effect only in 2017. The Court emphasized that it is unreasonable and illegal to hold a contractor liable for taxes which did not exist at the time of contract formation, unless explicitly stated in the tender.
Furthermore, the Court scrutinized the effect of pre-bid meeting clarifications which contradicted the main tender conditions. Relying on the Supreme Court precedent set in B. Rugmini Amma v. B.S. Nirmala Kumari (2013) 11 SCC 262, the Court ruled that clarifications cannot override or supersede the express terms of the tender document. The Court found the respondents’ attempt to rely on these contradictory clarifications as untenable.
Importantly, the judgment also took into account Government Circular dated September 19, 2017, and Government Resolution dated January 21, 2021, which clarified that the extra burden of GST on ongoing contracts would be compensated by the Public Works Department upon submission of authenticated records. The Court noted that many contractors had already been reimbursed based on these government instructions, and denying the petitioner’s claim amounted to arbitrary and discriminatory treatment.
The Court invoked Article 14 of the Constitution of India, which guarantees equality before the law and prohibits arbitrary or unfair discrimination. It held that denying GST reimbursement to the petitioner while granting it to other similarly placed contractors violated the principle of equal protection of laws.
Consequently, the Court quashed the impugned communication denying the GST reimbursement and directed the respondents to pay the verified GST amount within eight weeks. The petition was allowed without any order as to costs.
This judgment sets a vital precedent affirming that contractors cannot be burdened with new taxes introduced post-contract execution unless expressly provided for in the tender documents. It also reinforces that government clarifications inconsistent with tender terms cannot override the contract terms, and that equal treatment of contractors is mandated under Article 14.
Bottom Line:
Goods and Services Tax (GST) reimbursement under construction contracts - Contractors cannot be denied GST reimbursement for taxes introduced after the execution of the contract unless explicitly stated in the tender conditions. Pre-bid clarifications that contradict main tender conditions cannot override them.
Statutory provision(s): Article 14 of the Constitution of India, Goods and Services Tax Act, 2017 (GST Act)
