Concessional GST rate on freight and time charter services depends on non-availment of input tax credit.

Concessional GST under Notification No. 11/2017-Central Tax (Rate), as amended, was available only where input tax credit on goods or services used for the notified service was not availed. The Madras HC noted that the dispute turned on whether the assessee had wrongly availed and utilised such credit while charging the concessional rate for freight and time charter services. It treated the notification as an exemption-cum-concessional scheme and indicated that the proper course was to determine the exact extent of wrongful credit availed and utilised before sustaining fiscal consequences. The impugned order was therefore set aside for fresh determination of credit, interest and penalty.

---

---

Issues: Whether the denial of the concessional GST rate on freight and time charter services, on the ground of wrongful availment and utilisation of input tax credit, and the consequential demand, interest and penalty required to be sustained or interfered with.

Analysis: The concessional rate under Notification No.11/2017-Central Tax (Rate), as amended by Notification No.01/2018-Central Tax (Rate), was conditional upon non-availment of input tax credit on the goods or services used exclusively or partly in supplying the notified service. The petitioner had availed input tax credit while paying tax at the concessional rate, and the authority proceeded on the footing that the services then fell under the residuary entries attracting a higher rate. At the same time, the Court noted that the notification operated not merely as a rate prescription but also as an exemption-cum-concessional notification, and that the proper course was to call upon the assessee to reverse the wrongly availed credit together with the applicable interest and penalty consequences. The Court applied the principle that substantive notification benefits should not be denied mechanically, and that the extent of wrongly availed and utilised credit had to be accurately determined before final fiscal consequences could be sustained.

Conclusion: The impugned order was set aside for fresh determination of the actual input tax credit wrongly availed and utilised, together with the consequential interest and penalty, and the writ petition was partly allowed in favour of the assessee.

---