Software company denied tax credit for hotel services consumed in different state based on place of supply and consumption

The Authority ruled that the applicant, a software development and trading company registered in Rajasthan, is not entitled to claim Input Tax Credit of Central Tax paid in Haryana for hotel services procured there, as the tax is applicable based on the place of supply and consumption. Despite the applicant's reliance on CGST Act provisions, the Authority emphasized the distinction between CGST for intra-state supplies and IGST for inter-state supplies, determining that tax credit is not available for services consumed outside the registered state.

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Issues:
- Admissibility of input tax credit of tax paid or deemed to have been paid.

Analysis:
The applicant, a company engaged in software development and trading, sought an advance ruling on the eligibility of claiming input tax credit (ITC) of Central Tax paid in Haryana, while being registered in Rajasthan. The applicant procures goods and services for trading and export purposes from both within and outside Rajasthan. The applicant claimed ITC on taxes paid for goods and services used in business activities within Rajasthan. The specific issue pertained to the procurement of hotel services in Haryana, where the supplier charged CGST & SGST of that state due to the place of supply being in Haryana.

The applicant relied on Section 16(1) of the CGST Act, 2017, which allows a registered person to claim ITC on goods or services used in the course of business. The definition of "Input Tax" under Section 2(62) includes Central Tax and State Tax charged on supplies to a registered person. However, the jurisdictional officer opined that there was no provision debarring the eligibility for ITC on CGST paid on hotel services in Haryana.

During the personal hearing, the applicant reiterated their submissions and requested a prompt decision. The Authority considered the nature of CGST and IGST as per the Acts, highlighting that CGST is applicable to intra-state supplies while IGST applies to inter-state supplies. The principle of destination-based taxation under GST implies that tax is payable where goods and services are consumed. Since the applicant availed hotel services in Haryana, outside Rajasthan, it was concluded that ITC of Central Tax paid in Haryana is not available to the applicant registered in Rajasthan.

Therefore, the Authority ruled that the applicant is not entitled to claim Input tax credit of Central Tax paid in Haryana as a registered entity in Rajasthan.

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