West Bengal Authority of Advance Ruling in a matter of Senco Gold Ltd. reported at MANU/AR/0106/2019; Order no. 02/WBAAR/2019-20 in Case No. 8/2019, held that ITC shall be admissible where consideration to supplier has been paid by way of book adjustment.

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. 

The Applicant wishes to obtain a ruling as to whether ITC is admissible where debt of inward supplies from Franchisee is settled through book adjustment. 

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. 

Authority for Advance Ruling after taking cognizance of second and third proviso to Section 16 ibid, 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.