Wrong place of supply on Invoice by Supplier

[ROHIT GOEL]

Dear Sir,

M/s ABC Associates is paying rent for a property in Punjab whereas it is registered in Haryana. The landlord is registered in Punjab and issuing IGST Invoice mentioning place of supply as Haryana (i.e. location of recipient i.e. ABC Associates).

As per IGST Act, place of supply should be Punjab i.e. location of immovable property and as such place of supply is wrong on tax invoice. However, ABC Associates has claimed ITC on such invoice. Whether said ITC claim is liable for reversal owing to incorrect place of supply on invoice?

[Amit Agrawal]

As legal provisions are very clear with regards to place of supply in given situation, it is difficult to believe that supplier is charging IGST mentioning place of supply as Haryana (i.e. location of recipient i.e. ABC Associates) in bonafide manner (i.e. instead of CGST & SGST and place of supply as Punjab).

This itself gives ample reasons for Dept. to dispute subject ITC to M/s ABC Associates in given situation & resultant risk of litigation. And this can become more risky for M/s ABC Associate if it is found that M/s ABC Associate is deliberate party to the act of wrong-charging of taxes by the supplier.

To my mind, such situations should be avoided to the extent possible so as to avoid needless disputes, litigation and potential risks therefrom.

And, legal situation & potential outcome - as I believe - can be very different when it is case of bondafide interpretational issue w.r.t. Place of Supply as compared to some deliberate / forceful tax-structuring to suit the recipient.

Moreover, answering a hypothetical situation with limited facts may not be a good idea, as in actual world, Dept. can always make case to deny ITC taken in account other surrounding circumstances (specially when law is very clear w.r.t. place of supply in given case).

Hence and before I delve deeper on the legal possibilities & outcome (i.e. when Dept. tries to deny such ITC in given situation), I wish to know the followings:

As M/s ABC Associate is already registered under GST in Haryana and has taken a commercial premises on rent in Punjab, can you please explain factual reasons with corresponding legal provisions why M/s ABC Associate has not taken registration under GST in Punjab.

I am asking for this clarity as it seems & generally speaking that M/s ABC Associate is liable to get itself registered in Punjab as well in given situation. And, I do not see why such situation & potential risks therefrom - as stated in the query - really arises.

[Shilpi Jain]

It is a settled principle of law that the classification cannot be changed at the recipient's end. Stretching this principle the credit may not be deniable in the hands of the recipient if there is no collusion amongst them in this.

However for the future transactions communicate to supplier to charge proper taxes

[KASTURI SETHI]

In this scenario, reversal is not required. Issue has already been discussed in this forum.

[Rajat Gupta]

Question raised by Sh. Amit Aggarwal is correct. How can a firm having business in Haryana show its additional place in Punjab? The Rules clearly provide that a taxpayer can have separate place of business within state only.

AI Summary

Place of supply errors can jeopardize input tax credit claims where supplier invoices IGST instead of intra state tax. Risk to input tax credit arises when a supplier invoices IGST and lists the recipient's location as place of supply for rent of immovable property situated in another State; statutory place of supply rules assign supply to the property's location, and incorrect invoicing may lead to denial of credit, heightened scrutiny where collusion or deliberate tax structuring is suspected, and potential need for registration in the State of the property.