The Hon’ble AAAR, Tamil Nadu sets aside ruling of AAR, Tamil Nadu and holds that where a post purchase discount is extended by supplier of goods or services to Appellant on account of their registering in interactive automated data exchange arrangement setup by C2FO, the Appellant can avail Input Tax Credit of full GST charged on undiscounted supply invoice of goods/ services by their suppliers. A proportionate reversal of credit is not required to be done by the appellant. This is subject to their fulfilling other conditions stipulated by law and that GST paid by the Appellant for said goods/service is not reversed or reimbursed/ re-credited etc. to the Appellant in any manner by the supplier or on his behalf after credit has been availed by MRF.
Facts:
M/s. MRF Ltd. (“the Appellant” or “Buyer” or “MRF”) intends to enter into an arrangement with M/s. C2FO India LLP (“C2FO”), a subsidiary of Pollen Inc, India for setting up an interactive automated data exchange which can be installed for data interaction relating to sale & purchase of goods and services between a Buyer and a Supplier (any supplier of goods or input services of the Appellant) in compliance to various ethical, accounting and business standards. Both the Supplier and Recipient of goods or services should register on the platform provided by C2FO.
On the online platform C2FO, where post-sale, post supply and post issue of invoice depending on the early payment schedule offered by the supplier, the Buyer can accept discount and make payment. Then a commercial credit note would be issued. The payment would be made one time for each invoice at the discounted price along with the GST paid by the Supplier on the undiscounted value. The Appellant stated that they do not fall under Section 15(3) (a) or (b) of Central Goods and Services Tax Act, 2017 (“CGST Act”), hence the value of supply should be full undiscounted value. In the light of the above, the appeal is filed before the authority for advance ruling.
Issue involved:
Whether the MRF can avail the ITC of the full GST charged on the supply of invoice or a proportionate reversal of the same is required in case of post-purchase discount given by the supplier of the goods or services?
Held:
The Hon’ble AAAR, Tamil Nadu observed Section 9, 15 and 16 of the CGST Act and vide Order No. AAAR/04/2019 (AR) dated June 24, 2019, held:
- A conjoint reading of Sections 15 and 16 of the CGST Act which leads to the conclusion that a registered person is entitled to take full credit of the input tax charged on the supply of goods or services or both. As per the second proviso to section 16(2)(d) of the CGST Act which would come into play only where the buyer/ recipient fails to pay the supplier of goods the amount towards the value of the supply. This is not the situation here. The buyer has discharged the GST charged on the undiscounted transaction value at the time of supply. In the circumstances, if the GST charged and paid is not reversed/ refunded in whole or part subsequently in any manner or circumstances, the credit availed on the same need not be reversed.
- In the case of Rule 3 of Cenvat Credit Rules, 2004 which refers to the credit of duty “paid” by the inputs manufacturer and not duty “payable”, Section 16 of the CGST Act refers to the credit of input tax ‘charged’ and not “chargeable”.Therefore, the Appellant can avail the Input Tax Credit of the full GST charged on the undiscounted supply invoice of goods/ services by their suppliers. A proportionate reversal of the credit is not required to be done by them in case of a post-purchase discount given by the supplier to the Appellant through the C2FO platform, in the circumstances mentioned by the Appellant. This is subject to their fulfilling the other conditions stipulated by law and that the GST paid by them for the said goods/ service is not reversed or reimbursed/ re-credited etc to the Appellant in any manner by the supplier or on his behalf after the credit has been availed by the Appellant.
Citation: [2019] 108 taxmann.com 65 (AAAR – TAMILNADU)
Important Provisions:
Section 9(1) of CGST Act:
“(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty percent. , as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.”
Section 15(1) & (3) of CGST Act:
“(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
(3) The value of the supply shall not include any discount which is given––
(a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
(b) after the supply has been effected, if–
(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of a document issued by the supplier has been reversed by the recipient of the supply.”
Proviso to Section 16(2)(d):
“(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-
(d) he has furnished the return under section 39:
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge 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”