1.A Show Cause Notice bearing reference no. XXXXXXXX dated XX June 2024 (“SCN dated 24 June 2024”) was issued to the Noticee by the Ld. Sales Tax Officer Class XXXXXX (“Ld. Proper Officer”) proposing GST demand of Rs. XXXX/- (CGST and SGST each) along with interest amounting to Rs. XXXX/- (CGST and SGST each) under section 50 of the CGST Act,2017 (“the Act”) and penalty as applicable under Section 73 of the Act. on the sole allegation that while scrutinizing the annual return and financial statements filed by the Noticee for the period 20XX-20XX, it has been alleged by the Ld. Proper Officer that The Noticee has made procurement from the vendors who have shown place of supply as “other than YYYY” amounting to Rs.XXXX (IGST: Rs. XX, CGST: Rs.: XXX, SGST: Rs. XXX) and passed on the ITC which is not allowed.
2. In response to the allegation as set out in the SCN dated XX June 2024, the Noticee submits that the findings of the concerned authority are not in line with the legal matrix and factual positioning of the case.
NOTICEE’S SUBMISSIONS
1. In this respect the appellant would like to submit that Section 16 of the Act talks about eligibility and conditions for taking input tax credit. On complying with the provisions of the section ibid, the registered person is entitled to take credit of input tax charged on any inward supply of goods or services or both, used or intended to be used in the course or furtherance of business. Furthermore, the said amount shall be credited to the electronic credit ledger of such registered person. The conditions which the registered person is required to comply with, before making claim of any input tax credit are listed as follows:
- That the registered person is in possession of tax invoice or debit note issued by a supplier registered under the Act or such other tax paying documents as may be prescribed;
- That the registered person has received the goods or services or both;
- That the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of said supply; and
- That the person has furnished return under section 39 of the Act.
For ease of reference Section 16 of the CGST Act as in force during the relevant period is reproduced below for your kind reference:
“Section 16: Eligibility and conditions for taking input tax credit
Section 16(1): Every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner, specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
Section 16(2): Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, ––
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed.
(b) he has received the goods or services or both.
Explanation: For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person,
whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;”
where the services are provided by the supplier to any person on the direction of and on account of such registered person.
(c) subject to the provisions of section 41 , the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and
(d) he has furnished the return under section 39
Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment.
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon in such manner as may be prescribed
Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.
(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income tax Act, 1961 (43 of 1961), the input tax credit on the said tax component shall not be allowed.
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the ‘due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.”
2. In addition to the aforementioned conditions, the registered person has also to ensure that the input tax charged on any goods or services or both is not prescribed under the negative list of input tax credit as mentioned in Section 17(5) of the Act and other related provisions are also complied with. The section ibid reads as thus:
“(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: —
a. motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) except when they are used–
i. for making the following taxable supplies, namely: —
(A) further supply of such vehicles or conveyances; or
(B) transportation of passengers; or
(C)imparting training on driving, flying, navigating such vehicles or conveyances;
(aa) Vessels and aircraft except when they are used—
(i) for making the following taxable supplies, namely: —
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;
(ii) for transportation of goods;
(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such services shall be available—
(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;
(ii) where received by a taxable person engaged—
(I) in the manufacture of such motor vehicles, vessels or aircraft; or
(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;
b. the following supply of goods or services or both—
i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
ii. membership of a club, health and fitness centre;
iii. rent-a-cab, life insurance and health insurance except where––
(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and
iv. travel benefits extended to employees on vacation such as leave or home travel concession;
c. works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
d. goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.”
3. Thus, the eligibility for Availment of ITC is governed by the provisions of Section 16 and Sec 17 read with rules and these provisions does not restrict the Availment of input tax credit based on other state place of supply as inadvertently reported at supplier’s end. Therefore, Appellant is eligible to avail ITC in respect of these invoices subject to the fulfilment of condition lays down in section 16 and 17 of the CGST Act 2017 and no demand in this respect shall be raised on the appellant.
4. Recently CBIC vide circular No. 184/16/2022-GST dated 27.12.2022 clarified that the recipient of service of transportation of goods shall be eligible to avail input tax credit in respect of the IGST so charged by the supplier, subject to the fulfilment of other conditions laid down in section 16 and 17 of the CGST Act irrespective of its place of supply being outside India. The relevant extract of the circular is given below for your kind reference:
| “3. | In the case given in Sl. No. 1, whether the recipient of service of transportation of goods would be eligible to avail input tax credit in respect of the said input service of transportation of goods? | Section 16 of the CGST Act lays down the eligibility and conditions for taking input tax credit whereas, section 17 of the CGST Act provides for apportionment of credit and blocked credits under circumstances specified therein. The said provisions of law do not restrict Availment of input tax credit by the recipient located in India if the place of supply of the said input service is outside India. Thus, the recipient of service of transportation of goods shall be eligible to avail input tax credit in respect of the IGST so charged by the supplier, subject to the fulfilment of other conditions laid down in section 16 and 17 of the CGST Act.” |
5. Thus, the circular specifically mentions that if the conditions of Section 16 and 17 are fulfilled and if these sections do not restrict the Availment of input tax credit in any specific case then the taxpayer shall be eligible to claim such input tax credit. In the impugned matter as well, the appellant has availed the input tax credit as per the provisions of Section 16 & 17 of the CGST Act 2017 and thus the ITC availed by the appellant shall be eligible.
Conclusion
6. Accordingly, no present demand must be sought from the Noticee as the Notice has availed the input tax credit as per the provisions of Section 16 & 17 of the CGST Act 2017 and thus the ITC availed by the appellant shall be eligible.
7. Thus, it is kindly submitted before the office of your goodself to drop the proceedings upon the Noticee.
