2019 (8) TMI 307 - AAAR - GST

Appellate authority permits full Input Tax Credit on undiscounted GST invoices under Section 16(2)

In Re: M/s. MRF Ltd.,

In Re: M/s. MRF Ltd., - 2019 (27) G.S.T.L. 578 (App. A. A. R. - GST) Issues Involved:1. Eligibility to avail Input Tax Credit (ITC) on the full GST charged on undiscounted supply invoices.2. Interpretation of Section 16(2) of the CGST Act regarding post-purchase discounts.3. Applicability of anti-evasion provisions and legislative intent behind Section 16(2).Issue-wise Detailed Analysis:1. Eligibility to Avail ITC on Full GST Charged on Undiscounted Supply Invoices:The appellant, M/S MRF Limited, entered into an arrangement with C2FO India LLP for an automated data exchange platform to facilitate early payment discounts on invoices. The appellant contended that the value of supply for GST purposes should be the full undiscounted value and sought to avail ITC on the full GST charged on the undiscounted invoices. The original authority ruled that ITC could only be availed on the discounted value. However, the appellate authority set aside this ruling, allowing the appellant to avail ITC on the full GST charged, provided the GST paid is not reversed or reimbursed.2. Interpretation of Section 16(2) of the CGST Act Regarding Post-Purchase Discounts:The appellant argued that the proviso to Section 16(2) of the CGST Act, which requires payment of the value of supply along with tax within 180 days, should be interpreted to mean the commercially agreed price between the supplier and the recipient. They contended that the legislative intent was to ensure timely payment to suppliers, especially in the MSME sector, and not to deny ITC when the full commercial price is paid. The appellate authority agreed with this interpretation, stating that the provision is an anti-evasion measure and does not apply to cases where the full commercial price and GST are paid.3. Applicability of Anti-Evasion Provisions and Legislative Intent Behind Section 16(2):The appellate authority examined the legislative intent behind Section 16(2) and concluded that it is an anti-evasion measure to ensure genuine supplies and timely payment to suppliers. The authority referred to the discussions in the GST Council meetings and CBIC circulars, which supported the view that ITC should be available on the full GST paid, provided the tax is not subsequently reduced or refunded. The authority emphasized that the provision aims to prevent evasion and ensure prompt payment, not to deny ITC when the commercial price and GST are fully paid.Conclusion:The appellate authority set aside the original ruling and allowed the appellant to avail ITC on the full GST charged on undiscounted supply invoices, subject to the condition that the GST paid is not reversed or reimbursed. This ruling applies to cases where post-purchase discounts are extended through the C2FO platform, and the appellant fulfills all other legal conditions for availing ITC.