1. The value added tax rate reduction by operation of law negates unilateral increase in the price for the goods with the view to keep the total contract amount intact.

The Supreme Court’s position

31 July 2019 the parties concluded the contract. The respondent agreed to deliver metal pipes to the claimant for 2,150,000 soums per meter including VAT at 20%. 

Since 1 October 2019 the VAT rate was reduced from 20 % to 15 % as per Nr 1 of DP-5837 dd 26 September 2019.

Although the respondent had to deliver a meter of metal pipe adding 15 % VAT, the respondent unreasonably raised the price of the metal pipe.

According to Art 382 I CC the contract may be amended and terminated by agreement of the parties, unless otherwise provided for by this Code, other laws or the contract. Clause 8.1 of the contract states that any amendments and additions to the contract are valid only if there is a written agreement of the parties. The Contract between the parties, however, did not see amendments or additions.

In October-November 2019 as a result of an unreasonable price increase, the claimant paid 561 594 088,60 soums for 7 209.3 m of the metal pipe with extra 77 898,56 soums (1 869 565,22-1 791 666,66) per meter. In addition, the claimant paid 15 % VAT on the price of the metal pipe. The respondent calculated this VAT as a result of the non-consensual and unreasonable increase in the prices for the metal pipe. In this case, the overpaid 645,833,201.89 soums is to be returned to the claimant.

The court of first instance incorrectly dismissed the claim on the payment of 645 833 201.89 soums.