Sanghvi Movers Ltd., 2020 (32) G.S.T.L. 586 (App. A.A.R. – GST – Tamil Nadu)

Branch office is entitled to avail full input tax credit where payments to Head office are made by netted off against receivables.

 

In the matter of Sanghvi Movers Ltd. In re 2020 (32) G.S.T.L. 586 (App. A.A.R. – GST – Tamil Nadu), the case is covered by Schedule I of the CGST Act. The transaction is between distinct persons. The appellant in the tax invoice raised on their customers mentions that the payment to be made either by Cheque/DD in the name of ‘SANGHVI MOVERS LIMITED’ or directly to the account of SML HO at Pune. The appellant has represented that the receipts and payables are accounted at the entity level only. The HO being distinct person in the eyes of law and the transaction is in the course of furtherance of business, the supply is taxable supply for which SML HO has adopted a value agreed under the Tracing clause of the MoU and paid the tax on the value declared in the Invoice. The proviso to rule 37, provides for deemed payment of value in such transactions. Even considering that the said proviso does not have application in the case at hand as there is a value stated in the Tax Invoice as held by the Lower Authority, we find no reason to restrict the Input Tax Credit of the tax paid by the SML HO, in the hands of the appellant as it has been substantially brought out that the ‘consideration’ stands paid to the SML HO either by the customer of the Appellant or by setting off against the payables of the appellant to SML HO, in respect of lease/hire of Cranes, etc. which is as per the established accounting principles. Therefore, we do not find any reason to restrict the eligibility of ITC credit under section 16 (2) of the Act, in the case it was held that branch office is entitled to avail full ITC where payments are netted off against receivables.

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