A. ISSUE:
1. According to sub-section (1) of section 16, registered person shall be entitled to take credit of input tax
- in manner specified under section 49
- subject to conditions and restrictions as may be prescribed.
2. As per Notification No. 11/2017 Central Tax (Rate), CGST on the following services shall be levied at a lower rate of 5% provided that ITC has not been taken :
- Construction
- Housekeeping
- Restaurant
- outdoor catering
- transport of passengers
- chit fund
[Amended from 18% with no condition / restriction on ITC]
3. Notification No. 11/2017 Central Tax (Rate), says it is issued in exercise of powers conferred by
- sub-section (1) of section
- sub-section (3) of section 9
- sub-section (4) of section 9
- sub-section (1) of section 11
- sub-section (5) of section 15
- sub-section (1) of section 16 and
- section 148
4. Can conditions on ITC be specified in a notification issued by CG on recommendations of GST Council? (Refer column no. 5 of the Table of the said notification).
B. DISCUSSION:
1. As per sub-section (1) of section 9, CGST shall be levied at such rates, as may be notified by the Government [i.e. Central Government as per clause (53) of section 2] on the recommendations of the Council [i.e. GST Council as per clause (36) of section 2].
2. As per sub-section (2) of section 9, the Government (CG), on the recommendations of the Council (GST Council), may specify categories of supply of goods or services by notification.
3. As per sub-section (4) of section 9, the Government (Central Government), on the recommendations of the Council (GST Council), may specify a class of registered persons by notification.
4. As per sub-section (1) of section 11, Government (Central Government), on the recommendations of the Council (GST Council), may by notification., exempt goods or services from tax leviable thereon
5. As per sub-section (5) of section 15, value of such supplies as may be notified by Government (Central Government) on the recommendations of Council (GST Council) shall be determined in such manner as may be prescribed.
6. As per sub-section (1) of section 16, every registered person shall be entitled to take input tax credit,
-
- in the manner specified under section 49
- subject to such conditions and restrictions as may be prescribed.
7. As per section 148, Government (Central Government), on the recommendations of the Council (GST Council) , may notify
-
- certain classes of registered persons and
- special procedures (with respect to registration, furnishing of return, payment of tax and administration
8. As per clause (80) of section 2, notification means a notification published in the Official Gazette and the expressions “notify” and “notified” shall be construed accordingly.
9. As per clause (87) of section 2, prescribed means prescribed by rules made under this Act on the recommendations of the Council (GST Council).
3. FINDINGS:
1. At first, CG on the recommendations of the GST Council may issue notification under other section referred therein, i.e. u/s
- sub-section (1) of section 9
- sub-section (3) of section 9
- sub-section (4) of section 9
- sub-section (1) of section 11
- sub-section (5) of section 15 and
- But they do not talk about conditions and restrictions on ITC.
2. Kindly note that sub-section (1) of section 16, reads “conditions and restrictions” may be prescribed. Legislature does not use the “or”. As per my limited understanding, the word “and” has generally a cumulative sense. Both the words have to be read together.
3. Hence, it may be safely conceded that both conditions and restrictions on ITC under sub-section (1) of section 16 may be prescribed by way of CGST Rules only and not notified by any notification.
4. Secondly, neither the word “conditions” nor the word “restrictions” is defined. Also the word “taken” with respect to ITC is also not defined.
5. Also that, except for 1.5% / 7.5% without ITC, there is no other option available to supplier of construction service. 5. In that case, whether the phrase, “credit of input tax has not been taken” is a condition or restriction?
6. It can be said that as per the condition specified in column 5, ITC is restricted because it cannot be taken.
CONCLUSION
1. On the basis of aforesaid discussion, reasonable inference can be drawn that conditions on input tax credit, specified in column 5 of the Table in NN 11/2017-CT(R) is unfounded.
[Kindly do share contrary views if any]
(Republished with amendments)
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