GST Credit appearing as Ineligble in Bill To -Ship To Transactions

[Sachin Mohite]

Dear Sir/ Madam,

One of our client (A) of Maharashtra Supplied Material to (C) of Gujarat on the instruction of his customer (B) at Maharashtra. Consideration is paid by B to A and B further raised invoice to C.

A has applied IGST, as material moving outside Maharashtra, in its Invoice to B as per Section 7 of IGST and accordingly uploaded Return showing Place of Supply as Gujarat.

However in GSTR 2 of B on Portal, said invoice is appearing but showing ineligible for tax credit to B.Since apply of IGST by A is as per provisions of IGST, B should get the Credit of the same.

Query : How this technical problem can be solved so that B will get the credit for the same as everything all data on portal is freezed for said transaction.

[prakash kumar]

Place of Supply as per Sec 10(1) (b) of IGST act will be Maharastra. You can rectify such through GSTR 2, which supplier need to accept through GSTR 1A.

[Sachin Mohite]

Thanks Prakash Sir for your reply,

In GSTR 2 , field of POS is freezed and could not be changed at Our end.

Further if POS is Maharashtra , IGST could not be applied. Since Material is actually being moving to Gujarat , IGST is applicable. Facing lot of difficulties to get the Credit due to such restrictions in Software Developed for GST.

[MUKUND THAKKAR]

Where is B is located ?

[Sachin Mohite]

B is Located in Maharashtra

[DR.MARIAPPAN GOVINDARAJAN]

You can approach the Helpdesk.

[MUKUND THAKKAR]

if you are loacated in Maharashtra and supplier A is also Maharashtra in transcation is Bill to Ship to than your supplier should be charge only CGST and SGST not IGST. please makes necessary correction in GSTR-2 by adding invoice mode and rectify mistakes.

[Ganeshan Kalyani]

Place of supply is that place where invoice is raised. Here invoice is raised within the State. Hence CGST , SGST will be applicable.

[Sachin Mohite]

Dear Sirs

Thanks to all for your comments. However all comments received on my query are appears to be by invoking Section 10(1)(b) of IGST Act. Relevant wordings of the said provision are as follows –

‘where goods are delivered by the supplier to recipient or any other person on the direction of a third person … it shall be deemed that the said third person has received the goods and place of supply of such goods shall be the principal place of business of such person.’

Following is the sequence of Ship to Bill to Transactions in our Query -

A(Maharashtra) -----> Invoice to B (Maharashtra)-----> Invoice to C(Gujarat)

(1st Persons) (2nd Person) (3rd Person)

Material Shipped by A to C at the Instruction of B.

Original Contract is between A & B. Thus in the said contract B is the 2^nd Person and C will be the third person. In Invoice by A to B IGST is charged and also in invoice by B to C IGST is charged.

In our case material is delivered at the instruction of 2^nd Person (B) only and not at the instruction of 3^rd Person (C). Thus Section 10(1)(b) can not be invoked in our case as in our opinion Section 10(1)(a) squarely apply and attract IGSTfor Invoice to B by A [ as per Section 7 read with section 10(1)(a) ] since the material is moving out of Maharashtra and the movement of goods terminate at Gujarat.

As per Section 20 of IGST Act, for Input Tax Credit, Provisions of CGST Act will apply. Further as per Section 16 of CGST Act, condition for claiming Input Tax Credit is as follows

Section 16(2)(b) : Person has received the goods

Explanation.- For the purpose of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient ‘on the Direction of Such Registered Person’, before or during the movement of such goods.

Thus 16(2)(b) refers to On the Direction of Registered person (and not third person). Thus in our case B( at Maharashtra) is the Registered Person and entitled to claim credit as goods are moving at his direction and it is deemed that he has received the goods.

It appears to be hitch in Portal by stating transaction as ineligible for credit to B by applying lock on claiming credit by B (of Maharashtra) for IGST charged by A(of Maharashtra). However by plain reading of provisions of IGST & CGST Act, such lock appears to be not as per the provisions of the Act and undue hardship to the tax payer.

[Ganeshan Kalyani]

Sir place of supply is Maharashtra and supplier is also in Maharashtra. Therefore it is local sale and CGST + SGST will be applicable.

AI Summary

Input tax credit entitlement: recipient directing shipment may claim credit despite portal restrictions blocking IGST credit. A Maharashtra supplier charged IGST on an invoice to its Maharashtra contracting customer because goods were shipped to Gujarat; the contracting customer contends it may claim input tax credit under Section 16(2)(b) of the CGST Act (deeming receipt where goods are delivered on the direction of the registered person), while the GST portal has frozen place of supply data and blocked credit, creating a procedural barrier inconsistent with the statutory credit entitlement.