The High Court of Allahabad has held that bidders are required to mention the GST Rate and the HSN Code in the Notice Inviting Tender to ensure uniform bidding from all participants.
A bench of Justices Sunita Agarwal & Jayant Banerji has held that the same is necessary in order to ensure that all tenderers and bidders are provided a “level playing field”.
“The mentioning of the HSN Code in the tender document itself shall resolve all disputes relating to fairness and transparency in the process of selection of bidder, by providing ‘level playing field’ to all bidders/tenderers in the true spirit of Article 19(1)(g) of the Constitution of India”
The court has extrapolated on the legal position in light of the facts and circumstances of the case – “whether the the classification of HSN Code is integral to the tendering process, i.e., whether it has an impact on the selection of tenderers or the choice of tenderers while ranking them after opening the financial bids”.
The Respondent, Diesel Locomotive Works Varanasi published a notice inviting e-tender for procurement of Turbo Wheel Impeller Balance Assembly. The petitioner contended that the a circular issued by the Railway Board indicates that bidders were required to specify the percentage of local content in the material being offered in accordance with the Make in India policy and as the value of GST was not mentioned in the bidding documents, those bidders which had quoted a lower GST rate could have outbid the petitioner. Respondent No. 6 (Krishna Bearing) had quoted a GST rate of 5% while the petitioner Bharat Forge, quoted a GST rate of 18%, organically increasing the total bidding price of the Petitioner.
It was further contended that the GST rates of the products and services have been duly clarified/fixed by the Goods and Services Tax Council, using the Harmonized System of Nomenclature (HSN) Codes for each product/service, to specify the rates at which GST would be applicable. The Petitioner quoted the applicable rate of GST Value at 18%, even in the absence of the HSN codes for each product or service by the Respondent Company.
It was pointed out that neither the NIT (Notice inviting tender) nor the tender document published by respondent no.1 mentioned the relevant HSN code applicable to the procurement product. In light of the above facts, Court, relied on Reliance Energy ltd and another vs Maharashtra State Road Development Corporation ltd and others reported in (2007) 8 SCC 1 which held that ‘Level playing field’ is an important concept while construing Article 19(1)(g) of the Constitution of India. When Article 19(1)(g) confers financial right to carry on business to a company, it is entitled to invoke the doctrine of ‘level playing field’.
Court held that there will be disparity in the total price offered on account of difference in the GST rates quoted by each bidder and that the fair competition or ‘level playing field’, would, therefore, be denied to each bidder as someone may bag the tender by quoting lesser rate of GST (lesser GST value), which may result in substantial difference in the total price offered by bidders/tenderers. In this light, court went on to explain that,
“The HSN code (Harmonized System of Nomenclature) is provided for each product/service by GST Council to specify the rate at which GST would be applicable. The suppliers have to quote HSN Code of the product to be supplied by them in the tender document, itself. The mentioning of correct HSN Code is necessary to determine the GST rate (GST value) which is to be added in the base price to arrive at the final price offered by the bidder/tenderer.”
Court further noted that mentioning the GST rate or HSN Code in the tender document is integral to the process of selection of tenderer and directed Diesel Locomotive Works to mention the same in the NIT.