In re Priya Holdings Private Limited (GST AAR Gujrat)
Background and Issue
M/s. Priya Holdings Private Limited, an importer of various metal scraps, sought an advance ruling from the Gujarat Authority for Advance Ruling (AAR) on the admissibility of Input Tax Credit (ITC) for Integrated Goods and Services Tax (IGST) paid on imported goods. The central issue was whether the ITC would be subject to reversal under Section 16(2) of the Central Goods and Services Tax (CGST) Act, 2017, and Rule 37 of the CGST Rules, 2017, if the payment to the foreign supplier was deferred beyond the 180-day period stipulated in the law, even though such a deferment is permitted under Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) guidelines.
The applicant argued that the 180-day reversal condition should not apply to imports because:
- The foreign supplier does not charge or collect GST, and the IGST is paid directly to the government at the time of import, separate from the payment to the supplier.
- The second proviso to Section 16(2) excludes transactions under the Reverse Charge Mechanism (RCM), and IGST on imports is akin to an RCM transaction where the recipient (importer) pays the tax directly.
- The ITC is claimed based on the Bill of Entry, not the foreign supplier’s commercial invoice, which does not qualify as a “tax invoice” under the GST Act.
- The legislative intent behind the 180-day rule was to prevent tax evasion in domestic transactions where tax is payable to the supplier. This intent is not relevant to imports where the tax has already been paid to the government.
The Department countered this, arguing that the law makes no distinction between domestic supplies and imports regarding the applicability of the 180-day rule. They also attempted to get the application rejected on procedural grounds, citing that a similar issue was pending or decided in a case involving a related firm, M/s Nagar Sheth Ship Breakers, which was part of the same group of companies.
