Impact of place of supply of availing Input Tax Credit

[Alok Prakash]

Dear my fellow professionals,

I have gathered from discussion from my fellow professionals that in order to avail the Input Tax Credit (‘ITC’), place of supply of transaction has to be in the state where recipient is registered.

In case place of supply is outside the state where recipient is located, then ITC of the same will not be available.

Reason for the said interpretation is the fact that revenue will accrue to a state where place of supply of transaction is. That being the case, a state will not give ITC in case place of supply is outside the state.

Not sure which legal provision of CGST Act or Rules support this interpretation. Request if experts can guide on legal position for this issue and legal provisions that need to be referred for the same.

Assuming that above interpretation is correct i.e. place of supply has to be in the state where service recipient is registered, then whether ITC can be availed for below transaction:

A taxpayer registered in Maharashtra has exported goods wherein he has appointed freight forwarder from India. For the said transaction, freight forwarder has charged IGST as place of supply for the transaction is outside India (in terms of proviso to Section 12 of IGST Act). In this transaction, taxpayer registered in Maharashtra is getting an invoice with IGST (for place of supply outside India).

In case there is a possible interpretation that in order to claim ITC, place of supply has to be in the state where recipient is located, then whether IGST charged for export freight by Indian service provider will also not be admissible for ITC.

[Ganeshan Kalyani]

Sir, if a supplier is in Maharashtra and the recipient is also in Maharashtra then the CGST+SGST will be charged in invoice and based on that recipient can claim the ITC. However, being in same State if he is in SEZ location the supplier can charge IGST. In that case also the recipient can claim ITC.

[Rajagopalan Ranganathan]

Sir,

If the place of supply is within the same State where the supplier has taken registration, then the supplier will pay CGST and SGST and the same will be available as ITC to the recipient. If the recipient is located in another State then the supplier will pay IGST and the same will be available as ITC.

If a taxpayer registered in Maharashtra has exported goods wherein he has appointed a freight forwarder from India then the freight forwarder will charge IGST on the exporter. The same will be available as ITC to the exporter. The exporter can utilize the credit for payment of gst on supplies made within India or for payment of IGST on export goods which can be claimed as a refund.

Therefore the statement that in order to avail the Input Tax Credit (‘ITC’), the place of supply of transaction has to be in the state where the recipient is registered is not correct in my opinion.

[Shilpi Jain]

Where the place of supply is outside the state of the recipient state, GSTR-2B shows this as an ineligible credit. As rightly pointed out by the querust, there is no evident provision restricting credit in such scenario though.

Also in the case of fright-forward SERVICE, The place of supply would be outside India leading yo denial of credit. The amendment in the provision for place of supply was done to make this transaction an export of service however different ramifications have arisen.

Though you could consider taking the credit and intimating the department regarding absence of evident provisions in the law that would restrict the credit in this scenario

[PAWAN KUMAR]

Dear sir,

As per Sh.G Kalyani ji sir, if both supplier and recipient is in same state, then it will C+S transactions and claimable as ITC, but since place of supply of services provisions as per IGST12(8) proviso , export cases are specifically interpretated and liable for IGST and accordingly claimable under ITC.

[Shilpi Jain]

Pls have a look at GSTR-2B once to comfirm this

[PAWAN KUMAR]

2B is not yet notified.

[Ganeshan Kalyani]

Since 2B is relied upon by department, it is advisable to refer 2B.

[Sandeep Garg]

All the experts are requested to please clear:

If a works contract; of construction of a building situated in Madhya Pradesh; has been awarded to a taxpayer who is registered in Chhattisgarh. The principal contractor sub-contracts the said works contract to any other contractor who also is registered in Chhattisgarh itself. Please guide me how the billing will be done between the principal contractor and the sub-contractor. Whether CGST & SGST will be charged or IGST will be charged. Further, please clear whether the ITC of such tax will be admissible to the principal contractor.

You are requested to clear the case witt all the legal backing/authority.

Thanks & regards.

AI Summary

Professionals Debate ITC Eligibility Under GST for Export Freight Services and Cross-Border Supplies; Clarification Needed A discussion among professionals on a forum addresses the issue of availing Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime, focusing on the place of supply. The consensus is that if the place of supply is within the same state as the recipient, CGST and SGST are charged, allowing ITC claims. If the place of supply is in a different state, IGST is charged, which is also claimable as ITC. However, confusion arises when the place of supply is outside India, such as with export freight services, where IGST is charged, but GSTR-2B may show it as ineligible. The forum participants discuss the lack of clear legal provisions and suggest consulting GSTR-2B for guidance.