IGST Mechanism and availability of ITC

[Archna Gupta]

Dear All

Suppose the supplier is registered in UP and he makes inter state supply to the recipient in Delhi and charges IGST. Let's assume the POS of this transaction is Haryana (or any state other than Delhi).

My query is whether the recipient of Delhi can avail ITC of IGST paid on this transaction where the POS is any state other than Delhi.

Thanks in advance.

Archna Gupta

[Alkesh Jani]

Shri

In this regards, my view is, If the POS is as per the direction of recipient in Delhi, Yes, ITC is available.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

I agree with your views. What situation created doubt in the mind of querist ?

[Archna Gupta]

Dear Sir

The query arose because POS mentioned on the bill is different state than the registered state of Recipient. That means revenue arising to another state. In that case my question is if the revenue is accruing to Haryana, will he be allowed to set off that ITC (accruing to Haryana) from the liability of Delhi State (where recipient is registered).

Regards

[KASTURI SETHI]

Madam,

In this hypothetical query, does the recipient in Delhi act as an intermediary ? Is the recipient in Haryana a consumer ?

[Archna Gupta]

Dear Kasturi Ji

Let us take a situation. Supplier registered in Delhi having commercial property in Haryana. He lets out that property to a recipient registered in UP. The supplier will charge IGST on rental invoice and the POS will be Haryana. However the recipient (Tenant) is only registered in UP.

My query is whether the tenant can avail ITC of IGST where the POS is Haryana but he is registered in UP.

As per GST portal also the answer is coming "yes" but still I am not getting the proper reason behind that. Can you provide some legal backing?

[Ganeshan Kalyani]

Archna Madam, the query raised by you initially differes from the query at point 5.

[Ganeshan Kalyani]

Madam, as per your query at point 5, my view is that , a person has to obtain registration from the place from where he is supplying the goods or services. Here, the property is at Haryana, so the supplier at Delhi has to obtain registration in Haryana. Since recipient of UP comes and stay at Haryana the Haryana location has to charge CGST+SGST.

[Altamush Zafar]

If POS is different from the state in which the recipient is registered portal do not allow the ITC

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

I agree with your views at serial nos. 6 & 7 above. Reason behind change of question is that the query is hypothetical. If not hypothetical, full facts are not being disclosed by the querist.

[Shilpi Jain]

These kind of situations do arise. Say a property is taken on rent in Karnataka by a person in Telangana and the landlord is also in Telangana.

Then supplier charges igst with pos karnataka.

Will the TS recipient be eligible for credit?

[Archna Gupta]

Dear Shilpi

The query raised by me is very logical query. In fact I discussed the same issue with many Indirect tax experts. All answered in if and but. I checked the same in GSTR-2B also. In GSTR-2B if tax involved are CGST and SGST then it is obvious we can not claim ITC if POS is different state but if IGST is involved then GSTR-2B is allowing ITC. That I understood but only issue is I am not able to understand the reason behind that.

One of our expert has suggested to take registration in that state where the property is let out but it is not compulsory to take registration in every state where we are letting out our property and if ITC of IGST is allowed then all the problems will be sorted but the question is why GST portal is allowing ITC of IGST and if it is correct then which legal provision is justifying it.

[Amit Agrawal]

First real question, to my mind, is which legal provision denies such ITC in given situation?

Second question, to my mind, is why gst registration is not compulsory for such "recipient" in state where such property is physically located?

A holistic discussion can be done once we try to get answers to these questions, in my humble view.

[KASTURI SETHI]

Common Portal System 's software is not 100% in synchronisation with the GST ACTS. In case there is disharmony between the two the assessee is to follow the GST Act. An assessee is not responsible such disharmony.

[Shilpi Jain]

The eligibility of this credit is a question which will have to be answered by courts in future.

[KASTURI SETHI]

The simplest things are being made complicated unnecessarily. The querist is keen to seek relief from the experts (by way of opinion) and NOT from the Court, it being time consuming journey.

[Alkesh Jani]

Hon’ble Experts,

Please allow me to express my views on the issue discussed above.

At the very outset, portal is required to be aligned with the provisions of Act and Rules made thereunder. One cannot act as per the portal. The self-assessment method is chosen in GST, apart from renting of immovable property various other services may be provided for which IGST is applicable and hence portal gives that freedom of self-assessment. All the invoices uploaded by the supplier are reflected (made available) under FORM GSTR-2A and GSTR-2B, but it is on the assessee to assess the eligibility for availing ITC. If ITC is not available to the assessee, he is required to reverse in FORM GSTR-3B in appropriate column.

We can criticize, make representation to Council and Government, but we should not forget that they have their own limitations, for example, new returns as per recommendation of GoM, i.e. Sahaj, Saral and Sugam, GSTR-2 and GSTR-3, are kept in abeyance, the Model GST Law and Present features are different, these is all because of circumstances and challenges faced by the Government.

POS is to be determined as per provisions of IGST Act, 2017. In our case, it is specifically mentioned in Section 12(3) of IGST Act and Explanation given makes the provision very clear.

The question raised is whether registration is to be taken for each such if the supplier has property in many other states? The answer is “YES”, the reason is as per provision of CGST Act, person is required to take registration if his aggregate turnover is more than the threshold limit. Renting of immovable property is for business, to run a business one has to adhere to the law. To avoid any tax evasion government, enact the laws and rules are framed. If registration is not taken it will be difficult for government to track such transactions and even the supplier will not be able to justify the same, if proper accounting is not made. Larger Perception and wider perspective is required in the case.

Lastly, if any such doubt arises, one can opt for advance ruling, which is time bound and less expensive. To sum up above, we are to follow the provisions of law and rules made thereunder.

All the views expressed above are for information purpose only.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Excellent reply and topmost drafting. You have echoed my views.

[Alkesh Jani]

Shri Kasturiji Sir,

It is said "If the only prayer you ever say in your entire life is thank you, it will be enough.- by Meister Eckhart"

Thanks for your words of appreciation.

With Due Regards

[Narendra Soni]

Section 2 (62) “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him.

Section 2 (62) “registered person” means a person who is registered under section 25 but does not include a person having a Unique Identity Number;

Section 25 (1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed:

It is evident from the above legal provisions, a person will become registered person in a particular state only if he has taken registration in that state. Otherwise he will treated as an unregistered person.

And as all knows, unregistered person can not avail ITC

[KASTURI SETHI]

Section 2(85) “place of business” includes -

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or

(b) a place where a taxable person maintains his books of account; or

(c) a place where a taxable person is engaged in business through an agent, by whatever name called;

Above options can be availed for the purpose of registration.

AI Summary

Input tax credit of IGST: claimability depends on place of supply and registration requirements under the GST law. Claiming Input Tax Credit of IGST where the invoice shows a Place of Supply in a state other than the recipient's registered state depends on statutory tests for Place of Supply and on proper registration. Portal listings (GSTR 2A/2B) do not create entitlement; the recipient must self assess eligibility and, if not entitled, reverse credit in FORM GSTR 3B. Registration at the location where taxable activity is carried out may be required, and uncertain cases may be resolved by seeking an advance ruling.