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.

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.