Senco Gold Ltd., 2019 (24) G.S.T.L. 688 (A.A.R. – GST – West Bengal)

Input tax credit shall be admissible where consideration to the supplier has been made by way of book adjustment.


Facts: The Applicant was engaged in the manufacturing and retailing of jewellery and articles made of gold, silver, platinum, diamonds and other precious stones under the brand name “Senco Gold & Diamonds”. Apart from his own retail stores, the applicant was operating under franchise network wherein it has granted rights and license to various franchisees to operate showroom under its brand name. Applicant was raising tax invoices for supply of jewellery and other articles as well as towards franchise support fee to its franchisee. In return, franchisee was also issuing tax invoice to Applicant for supply of old jewellery received from customers. Applicant sometimes settles the mutual debt through book adjustment. 

Issue: Whether ITC is admissible where debt of inward supplies from Franchisee is settled through book adjustment. 

Held: The Authority for Advance Ruling after taking cognizance of second and third proviso to Section 16 of the CGST Act,2017, noted that ITC shall be admissible upon payment by the recipient. Consideration as per Section 2(31) of CGST Act, 2017 is of very wide ambit which does not restrict the form of payment. It does not provide for payment necessarily in the form of money only. Thus, reduction in book debt by way of an entry is a valid form of ‘consideration’ and accordingly, ITC shall be admissible to the applicant in such scenario.

Second proviso of Section 16(2) of IGST Act, 2017 provides that ITC so availed by the recipient has to be reversed along with interest, if payment of value of supply along with tax thereon is not made by the recipient to the supplier within 180 days of issuance of invoice. Third proviso to aforesaid section provides that ITC shall be eligible upon payment by the recipient to the supplier. 




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