Goods and Services Tax

Credit eligibility – cases where no payment liability exists

Goods and Services Tax – GST – By: – Shilpi Jain – Dated:- 5-12-2018 – Under GST, any registered person would be eligible to claim ITC of taxes paid on goods or services procured, which are used or intended to be used in the course or furtherance of business and to the extent used for effecting taxable supplies, unless specifically restricted u/s 17(5) of the Act. Apart from the restrictions specified in section 17(5) of the Act, there could be situations where credit would become ineligible, like non-payment within 180 days in certain cases, non-receipt of proper tax invoice, etc. However, it can be said that the provisions are not as stringent as under the earlier laws where receipt of the capital goods in the premises/factory of the manufacturer was required. Further, under GST there could be some situations where, say, in spite of non-receipt of the goods in the premises of the recipient or non-payment of consideration to the supplier, credit would still be eligible. It is also to

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the Indian company, falls under the purview of input tax credit. Further, the goods are used by the Indian company for business purpose and for effecting taxable supplies as required by section 16(1) and 17(2) of the Act. Hence, prima facie ITC is eligible. Further, section 16(2) of the Act prescribes conditions for availing ITC, which are as follows: Condition Applicability in the instant case The registered person is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as may be prescribed As per rule 36 of CGST Rules 2017, BoE is a prescribed document. The registered person has received the goods or services or both The Indian company has received the goods. The tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply. It is only provided that tax has to be paid to the Government, i.e. it c

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pay the taxes to the supplier, but the same has to be paid to the Government directly. Thus, it can be said that this proviso is not applicable. Therefore, as all the conditions prescribed for availing ITC are satisfied and credit is not restricted under section 17(5) of the Act, it can be said that the credit of the taxes mentioned in the BoE will be eligible to the Indian company irrespective of the fact that no amount has been paid by such company to either the Government or to the supplier, in respect of the BoE. Case-2: A company has purchased machinery for which the supplier has given 3 years warranty. After 1 year, the machinery was damaged. Since, the machine was in the warranty period, the supplier replaced the machinery free of cost. However, while sending the spare parts for replacement, the supplier has discharged GST liability at its end by treating such replacement as supply in terms of entry 1 of Schedule I to the Act (permanent transfer of business assets on which ITC

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