2019 (7) TMI 40 - AAR - GST

GST Ruling: Input Tax Credit for Capital Goods Received Pre-GST Rejected for Lack of Jurisdiction

The application for advance ruling regarding the admissibility of input tax credit for capital goods received before the GST regime was rejected as the ... Admissibility of input tax credit of pre-GST CENVAT on capital goods - scope of advance ruling jurisdiction under Section 97(2) of the CGST Act - definition of input tax and input tax credit under Section 2(62) and Section 2(63) of the CGST Act - effect of repeal and saving of rights under Section 174 of the CGST ActAdmissibility of input tax credit of pre-GST CENVAT on capital goods - scope of advance ruling jurisdiction under Section 97(2) of the CGST Act - definition of input tax and input tax credit under Section 2(62) and Section 2(63) of the CGST Act - Whether the Authority for Advance Ruling has jurisdiction to decide admissibility of credit of duties (CENVAT) paid on capital goods procured before 1 July 2017 and sought as input tax credit under the GST Act - HELD THAT: - The Authority examined whether the questions fall within the class of questions entertainable under Section 97(2) of the CGST Act. Section 97(2)(d) permits advance ruling on the admissibility of input tax credit of tax paid or deemed to have been paid under the Act. The terms 'input tax' and 'input tax credit' are defined in Section 2(62) and Section 2(63) respectively and relate to taxes chargeable under the GST law (central, state, integrated or union territory tax) and certain taxes payable under specified provisions. The Authority held that credit of duties paid under the pre GST regime (CENVAT/Central Excise/VAT/service tax) are not within the statutory definition of 'input tax' under the CGST Act. Consequently, a question seeking a ruling on admissibility of CENVAT credit arising under the erstwhile law does not fall within the ambit of matters on which an advance ruling can be given under Section 97(2). Although the applicant relied on repeal/saving provisions (Section 174) and prior CENVAT rules, the determinative legal point for the Authority was jurisdictional: the AAR's remit is confined to credits of taxes recognized as 'input tax' under the CGST Act, and it cannot adjudicate on rights arising exclusively under the repealed regime. Accordingly the application was found not maintainable and liable for rejection.Application for advance ruling rejected as not maintainable because the AAR has no jurisdiction to rule on admissibility of pre GST CENVAT credit sought as input tax credit under the CGST Act.Final Conclusion: The AAR refused to decide the substantive question on credit of duties paid prior to 1 July 2017, holding the application non maintainable and rejecting the advance ruling petition for want of jurisdiction under Section 97(2) of the CGST Act. Issues Involved:1. Admissibility of input tax credit for capital goods received prior to 01 July 2017.2. Adjustment of input tax credit for capital goods procured before 01 July 2017 against tax liability on outward supplies.Issue-wise Detailed Analysis:1. Admissibility of Input Tax Credit for Capital Goods Received Prior to 01 July 2017:The applicant, M/s. Bauli India Bakes and Sweets Private Limited, sought an advance ruling on whether the input tax credit (ITC) availed in respect of capital goods received before 01 July 2017 is admissible. The applicant argued that under Rule 6(4) of the CENVAT Credit Rules, 2004 (CCR), credit on capital goods used exclusively for the manufacture of exempt goods was not available. However, if such goods became dutiable within two years, the credit would be admissible. The applicant contended that since their final products became taxable under GST from 01 July 2017, they should be eligible for ITC on capital goods received before this date.They further referenced Section 174 of the CGST Act, which contains repeal and saving clauses, asserting that rights, privileges, obligations, or liabilities acquired under the repealed acts should not be affected by the introduction of GST. The applicant also cited Section 18(1)(d) of the CGST Act, which allows ITC on capital goods used for exempt supplies that later become taxable, arguing that this provision should apply to their case.The concerned officer, however, submitted that under Section 18(1)(d) of the CGST Act, ITC was not allowed on capital goods used in the manufacture of exempt goods in the pre-GST regime, and hence, ITC on such capital goods cannot be granted.Upon review, the authority observed that the applicant's questions pertained to the admissibility of ITC on capital goods procured before the GST regime, which is not covered under Section 97(2) of the CGST Act. The authority emphasized that the definition of 'input tax' under Section 2(62) of the CGST Act pertains to taxes paid under the GST regime and does not include taxes paid under the erstwhile laws. Consequently, the authority concluded that it did not have jurisdiction to pass a ruling on the admissibility of CENVAT credit for taxes paid under the pre-GST regime.2. Adjustment of Input Tax Credit for Capital Goods Procured Before 01 July 2017 Against Tax Liability on Outward Supplies:The applicant also sought clarification on whether they could adjust the ITC for capital goods procured before 01 July 2017 against their tax liability on outward supplies. The authority reiterated that the questions raised by the applicant were not maintainable under Section 97(2) of the CGST Act, as they pertained to the admissibility of CENVAT credit under the pre-GST regime, which falls outside the scope of the GST Act.In conclusion, the authority rejected the application for advance ruling, stating that it was non-maintainable because the questions raised did not fall within the jurisdiction of the authority under the GST Act.Order:For reasons discussed, the application for advance ruling is rejected, being non-maintainable.