2021 (12) TMI 464 - AAR - GST

Transfer of Credit to ISD under CGST Rules: Ruling Clarifies Tax Treatment & Compliance

The ruling by the Authority for Advance Ruling confirmed that the transfer of credit to an Input Service Distributor (ISD) under Rule 54(1A) of the CGST ... Transfer of Credit under Rule 54(1A) of the CGST Rules to the ISD - issuance of Invoice or Debit/Credit Note - Outward Taxable Supplies or not - HELD THAT:- Under rule 54(1A)(a), of the CGST rules inserted vide Notification No. 3/2018 dated: 23.01.2018, a registered person having same PAN and State code and having Input Service Distributor(ISD) may issue an invoice or, a credit note or a debit note in order to transfer the credit of the common input services to the ISD. And such invoice shall contain taxable value and rate and amount of credit to be transferred. Under clause (b) of this sub rule the taxable value in such invoice shall be the same as the value of common service - Further, under Sec 37(1) of the CGST Act, 2017 and Sec 14 of the IGST Act, 2017 read with rule 59(1) of CGST Rules, 2017 every registered person other than an ISD or Non-Resident Taxable Person (NRTP) or a person opting for composition or a person doing TDS & TCS on the supplies received shall furnish details of outward supplies in Form GSTR-1. A combined reading of the provisions prescribed above clearly indicate that a registered person intending to transfer the credit on common input services to ISD shall file the details of such credit in Form GSTR-1. However, if an invoice is raised on an ISD with the same State code the credit of tax can be issued for CGST & SGST by utilizing the IGST credit as indicated under Sec 49 of the CGST Act, 2017. Issues:Interpretation of Rule 54(1A) of the CGST Rules for transferring credit to an Input Service Distributor (ISD) and its implications on tax treatment and compliance.Analysis:The applicant, M/s. Nile Limited, sought an advance ruling on the transfer of credit under Rule 54(1A) of the CGST Rules to their ISD registration. They highlighted their operations in Andhra Pradesh and Telangana, paying GST under Reverse Charge Mechanism on common input services. The company aimed to distribute input credit among all states through ISD registration, as per Rule 39 of the CGST Rules. However, they faced challenges in transferring IGST to their ISD registration due to both registrations being in the same state.The questions raised by the applicant focused on the tax treatment and compliance aspects of transferring credit to ISD. They sought clarity on whether such transfers would be considered as 'Outward Taxable Supplies' and how to reflect the details in GSTR-3B. Additionally, they inquired about the treatment of IGST when the transferor and transferee have the same PAN and are in the same state or different states.During the personal hearing, the authorized representatives reiterated the company's position, emphasizing the need for clarification on the transfer mechanism and applicable tax laws for such transactions. The discussion and findings highlighted Rule 54(1A)(a) of the CGST Rules, emphasizing the process for transferring credit to ISD through invoices, credit notes, or debit notes. It was clarified that details of such credit must be furnished in Form GSTR-1, with specific provisions for utilizing IGST credit for CGST and SGST when issuing invoices to ISD with the same state code.The ruling issued by the Authority for Advance Ruling addressed the questions raised by the applicant comprehensively. It confirmed that the transfer of credit to ISD under Rule 54(1A) would be considered as 'Outward Taxable Supplies,' with specific guidelines on reflecting details in GSTR-3B. The ruling also clarified the treatment of IGST when the transferor and transferee share the same PAN and are in the same state, emphasizing the issuance of CGST and SGST credits. Overall, the judgment provided clarity on the transfer mechanism, tax treatment, and compliance requirements for transferring credit to ISD under the CGST Rules.