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

Place of supply affects eligibility to claim input tax credit; IGST on export freight may still be claimable.
Whether place of supply must match the recipient's State for claiming Input Tax Credit is disputed; practitioners report that when suppliers charge IGST for export-related freight the recipient exporter may still claim ITC and use it against domestic GST liabilities or IGST on exports, though GSTR-2B or reporting practices can show such credits as ineligible despite no clear statutory prohibition.