AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 521
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....espect of goods purchased from outsourced vendors, when payment is settled through book adjustment, against the debt created on outward supplies to these vendors. 4. The contentions of the Applicant; 4.1. The applicant submitted that in the course of manufacturing of footwear, the applicant outsources some activities to outside vendors. In few such cases the applicant are planning to sell few raw materials required for the production to these vendors. The supply of materials by the applicant to these vendors will be made as sale by raising taxable sales invoice. The vendors along with the, raw materials purchased from the applicant and other materials directly procured by them, manufactures footwear / parts of footwear as per the applicant's requirement and return to applicant. This transfer is also made as sale by vendor to the applicant under the cover of taxable sales invoice. The applicant intends to settle these mutual debts through book adjustments and settle the net dues only through bank transfer. 4.2. The applicant submits that second proviso to Section 16(2) of the GST Act provides that "where a recipient fails to pay to the supplier of goods or services of b....
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....ments and hence it is presumed that the jurisdictional officer has no specific comments to offer. It is also construed that there are no proceedings pending on the issue against the applicant. 6. Personal Hearing: 6.1. The applicant was granted an opportunity for a personal hearing on 20/07/2022 via virtual mode. Sri Sabin Mathew, Authorized representative of the applicant attended the personal hearing. The representative reiterated the contentions made in the application. 7. Discussion and Findings: 7.1. The issue was examined in detail. The application is admissible as per subsection (2) of section 97. The issue raised before the authority is regarding the admissibility of the ITC in respect of the goods purchased from out sourced vendors, when the payment is settled through book adjustment against the debt created on the outward supplies effected to these vendors itself. 7.2. The relevant provisions of Section 16 of the CGST Act that provides for the eligibility and conditions for taking Input Tax Credit reads as follows: - (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner, specified in ....
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....harge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: PROVIDED ALSO that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. 7.3. The second proviso to subsection (2) of Section 16 specifies that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services with tax payable thereon. The provision clearly limits the recipient's entitlement to input tax credit only to transactions where he has paid the consideration for the supply received, along with the tax payable thereon. Such input tax may be provisionally credited to the recipient's electronic credit ledger, but the same will be reversed in terms of the second proviso to section 16(....
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.... (a) the date of issue of invoice by the supplier or the last date on which he is required, under section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply : Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount. Explanation 1. - For the purposes of clauses (a) and (b), "supply" shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment. Explanation 2.- For the purposes of clause (b), "the date on which the supplier receives the payment" shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier. (3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest o....