TaxTMI 
TaxTMI 
AUDITORS DOING AUDIT U/S 65 OF CGST ACT RAISED ONE OBJECTION REGARDING RCM ON PURCHASE OF WOOD(RAW MATERIAL) FROM UN REGISTER DEALAR FOR MANUFACTURING OF PLYWOOD. FACTS ARE RCM ON RAW MATERIAL WAS DEPOSITED AND THE CREDIT IS AVAILED IN THE 3B RETURNS AGAINST TAX ON OUTWARD SUPPLY. OBJECTION OF THE AUDITOR IS CREDIT OF RCM ON RAW MATERIAL IS NOT ALLOWED.KINDLY PROVIDE CLARIFICATION OF THE NOTIFICATION ISSUED FOR RCM EXEMPTION. ALSO IF ANY CASE LAW AVAILABLE.
RCM ON PURCHASE OF WOOD FROM UNREGISTERED DEALAR
11 Jan 2023 
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Reverse charge mechanism on purchases from unregistered suppliers: input tax credit claimable when tax was paid despite exemption.
Whether tax paid under reverse charge mechanism on purchases from unregistered suppliers may be claimed as input tax credit when executive notifications exempted the reverse charge liability. Two principal arguments support credit: the statutory definition of input tax contemplates tax charged on supply so tax actually paid remains creditable despite an exemption, and revenue neutrality - the Government should not retain tax erroneously collected. Practical steps include identifying relevant notification coverage, preserving payment records, and relying on tribunal precedent allowing credit or refund where reverse charge was paid mistakenly. (AI Summary)
Whether tax paid under reverse charge mechanism on purchases from unregistered suppliers may be claimed as input tax credit when executive notifications exempted the reverse charge liability. Two principal arguments support credit: the statutory definition of input tax contemplates tax charged on supply so tax actually paid remains creditable despite an exemption, and revenue neutrality - the Government should not retain tax erroneously collected. Practical steps include identifying relevant notification coverage, preserving payment records, and relying on tribunal precedent allowing credit or refund where reverse charge was paid mistakenly. (AI Summary)