2018 (9) TMI 1768 - AAAR - GST

Appeal modified to deny input tax credit for zero-value supplies.

In Re: GKB LENS PVT. LTD. (Assistant Commissioner, CGST & CX, Tollygunge Division, Kolkata South Commissionerate)

The Appeal was disposed of with a modification to explicitly state that no input tax credit would be available for supplies made at Zero Value. The ruling ... Input Tax Credit - stock transfer from the Head Office of M/s. GKB Lens Pvt. Ltd. to its branches in other States at Zero Value - optical lenses and frames for spectacles and accessories. According to the Appellant “the wordings of the Ruling dated 30.05.2018 has created an impression that the recipient would be eligible for Input tax Credit if the supplier paid the tax.” Instead of those wordings the WBAAR should have declared in no uncertain terms that no input tax credit would be available for supply at Zero Value. Held that:- From a plain reading of law laid down under section 16 of the GST Act, it is clear that, inter alia, input tax credit is available only when the recipient is in possession of a tax invoice or debit note issued by the supplier registered under the GST Act, and in case of a supply between distinct and/or related persons, as between Head Office and Branches, the value declared in the invoice shall be deemed to be the open market value of the goods or services supplied. It is therefore clear that if the value declared in such invoice is zero no input tax credit is available to the recipient. The Ruling of the West Bengal Authority of Advance Ruling is modified to the extent that at the end of the second paragraph of the said ruling the following sentence will be added:- “No input tax credit, however, would be available for supply of goods / services at Zero Value.” Issues:1. Availability of Input Tax Credit on stock transfer from the Head Office to branches at Zero Value.Analysis:The Appeal was filed by the Assistant Commissioner against the Advance Ruling pronounced by the West Bengal Authority for Advance Ruling. The Respondent, a re-seller and importer of optical goods, sought an Advance Ruling on the transfer of goods from its Head Office in West Bengal to branches in other states. The issues raised were related to the pricing of goods and the eligibility for full input tax credit under specific provisions of the CGST Rules, 2017.The Advance Ruling Authority determined that the applicant had the option to value goods by applying the terms of the Second Proviso to Rule 28 of the GST Act, allowing for the transfer of goods at cost price. The expression 'where the recipient is eligible for full input tax credit' was clarified to mean that the recipient could claim full input tax credit based on the tax paid by the supplier as mentioned in valid documents under the GST Act.The Appellant challenged the Advance Ruling concerning the availability of Input Tax Credit on stock transfers at Zero Value. It was contended that the ruling created confusion regarding the eligibility for Input tax Credit when no tax was charged. The Appellant argued that clarity should have been provided that no input tax credit would be available for supplies made at Zero Value.During the hearing, the Respondent submitted a prototype invoice showing no tax charged on supplies made at zero value. It was acknowledged that input tax credit is only available when the recipient possesses a tax invoice issued by a GST-registered supplier. If the value declared in such an invoice is zero, no input tax credit is available to the recipient.The judgment modified the ruling to explicitly state that no input tax credit would be available for supplies made at Zero Value. It was clarified that even though the original question was correctly answered by the Advance Ruling Authority, the ruling needed to be modified to provide explicit clarity on the non-availability of input tax credit for zero-value supplies. The Appeal was disposed of accordingly, and the parties were informed of the Order for their reference.