AAAR upholds AAR ruling denying ITC of CGST on hotel services received in state where assessee is unregistered

Categories: Advance Ruling
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Facts:

M/s IMF Cognitive Technology Private Limited (“IMF” or “the appellant”), is a company engaged in development, designing & trading in all type of computer software and also in export of software. IMF has taken registration in the State of Rajasthan in GST Law.

IMF had earlier sought advance ruling on the following question –

Whether the ITC of CGST paid in Haryana Hotel will be available to IMF who is registered in Rajasthan State, whereby such tax is paid on inward supplies used for business of person registered in Rajasthan?

It was clarified by IMF that such hotel services are being used exclusively for the purposes of business of the applicant i.e. for meeting with prospective buyers & vendors.

Rajasthan AAR passed an order which ruled that ITC of CGST paid in Haryana is not available to the applicant who is registered in state of Rajasthan as the supplier of services and place of supply both are outside the state of Rajasthan, hence, ITC of CGST paid in Haryana is not available to the applicant.

The appellant being aggrieved by the said order appealed to the AAAR on the following grounds –

Whether in the facts and circumstances of the case and in law, is it justified by the AAR to decide admissibility of credit on the basis of location of supplier and place of supply, while provisions of GST law for admissibility of ITC are separately provided under chapter V of the GST Act and there is no correlation between admissibility of credit and place of supply?

Issue involved:

Whether the ITC of CGST paid in Haryana Hotel will be available to IMF who is registered in Rajasthan State, whereby such tax is paid on inward supplies used for business of person registered in Rajasthan?

Held:

The Hon’ble Rajasthan AAAR passed the following order vide Order No. RAJ/AAAR/01/2019-20 dated May 8th, 2019 observing as under:

  • Credit of Input Tax is admissible to a registered person subject to conditions and restrictions and input tax in the instant case, interalia is Central tax charged on inward supply of a registered person. Central tax is levied under section 9 of the CGST Act, 2017 (“the CGST Act”). Section 9(1) says that central tax is a tax levied on, all intra-state supply of goods or services or both and Intra-state supply of service as defined under section 8(2) of the IGST Act, 2017 (“the IGST Act”) means supply of services where location of supplier and place of supply of services are in the same state. Crux of the matter being that for a person registered in Rajasthan, Central GST or Central tax is a tax levied under section 9 ibid on supplies having both location of the supplier and place of the supply in Haryana.
  • At this point, it becomes absolutely clear that ITC of Central GST or Central tax would be available to a person registered in Rajasthan if the location of supplier and the place of supply of services is in Rajasthan. In other words, ITC of Central tax charged from the appellant in Haryana is not available to them in this case as both the location of the supplier and the place of supply of services are in the state of Haryana.

The Hon’ble Rajasthan AAAR upheld the ruling rendered by the AAR wherein ITC was held to be “not admissible” to the appellant. Also comments that the appeal filed is legally unsustainable and dismisses the same accordingly.

Citation:  TS-644-AAAR-2019-NT-IMF

 

Relevant Provisions :

 

Section 9(1) of the CGST Act : Levy and Collection

 

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 per cent., 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 8(2) of the IGST Act: Intra-State supply

Subject to the provisions of section 12, supply of services where the location of the supplier and the place of supply of services are in the same State or same Union territory shall be treated as intra-State supply:

Provided that the intra-State supply of services shall not include supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit.

Explanation 1. For the purposes of this Act, where a person has,

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

Explanation 2. A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.