High Court grants interim relief in GST dispute involving Delhi Jal Board works

New Delhi: The Delhi High Court recently provided interim protection to a contractor embroiled in a tax dispute concerning the levy of Goods and Services Tax (GST) on works executed for the Delhi Jal Board (DJB).

The matter originated from a writ petition filed by a construction firm that had carried out a works contract for DJB. The contractor had paid GST at 12 per cent, treating DJB as a “local authority.” However, the tax authorities challenged this classification, asserting that DJB should be considered a private entity in this context, attracting GST at the higher rate of 18 per cent. Consequently, a summary of a Show Cause Notice (Form DRC-01) was issued in September 2025 under Section 73 of the CGST Act, alongside an alert circular issued by the Directorate General of GST Intelligence.

The petitioner approached the High Court seeking to quash both the summary notice and the circular, arguing that the higher tax demand lacked legal basis. The Court observed that the central question, whether DJB qualifies as a “local authority” under GST, is a purely legal matter that requires judicial determination to prevent prolonged disputes and unnecessary litigation.

Referring to a similar precedent in Tirupati Cement Products v. Joint Director General of GST Intelligence, the Bench of Justice Prathiba M. Singh and Justice Shail Jain extended comparable interim relief to the contractor. The Court noted, “The question raised as to whether DJB is a local authority is a legal issue which would have to be determined, so as to avoid protracted proceedings.”

Accordingly, the Court stayed the tax proceedings initiated through the Show Cause Notice. The tax authorities have been directed to file their counter affidavit within four weeks. The matter has been scheduled for further hearing in February 2026, providing the petitioner temporary respite from the GST demand while the legal question is adjudicated.

This ruling underscores the judiciary’s approach in granting interim protection in GST disputes, particularly where the classification of government or quasi-government entities affects the applicable tax rate. It also highlights the potential for prolonged litigation if such fundamental legal issues remain unresolved.