Case Law Details
In re Srinivas Plywoods (GST AAR Karnataka)
The Authority for Advance Ruling (AAR) Karnataka issued a detailed ruling in the case of M/s. Srinivas Plywoods regarding several queries under the GST Act. Here’s a summarized overview of the case:
Background
M/s. Srinivas Plywoods, located in Hubli, Karnataka, applied for an Advance Ruling under Section 97 of the CGST Act, 2017, and KGST Act, 2017. They sought clarification on three main issues:
- Input Tax Credit (ITC) on Renting of Commercial Property
- Applicability of Reverse Charge Mechanism (RCM) on Inward Freight
- Set-off of Input and Output in cases of multiple business operations under the same GST number
Proceedings and Findings
i. Input Tax Credit on Renting of Commercial Property: The applicant asked if they could claim ITC on building materials used for constructing a commercial complex which was later rented out. The AAR noted a relevant case pending in the Supreme Court related to the eligibility of ITC in such scenarios (M/s. Safari Retreats Private Limited v. Chief Commissioner of CGST). Since the matter was sub judice, the AAR declined to provide a ruling until the Supreme Court’s decision.
ii. Applicability of RCM on Inward Freight: The audit report by the Deputy Commissioner of Commercial Taxes raised an objection regarding non-payment of tax on freight charges. The AAR invoked the first proviso to Section 98(2) of the CGST Act, which states that an application cannot be admitted if the question raised is pending or decided in other proceedings concerning the applicant under the GST Act. Therefore, this issue was deemed inadmissible for an AAR ruling.
iii. Set-off of Input and Output in Multiple Business Operations: The applicant sought guidance on how to set off input and output taxes when conducting multiple businesses under a single GST number. The AAR clarified that Section 97(2) of the CGST Act specifies the issues for which advance rulings can be sought, and questions regarding set-off in such scenarios are not covered under these provisions. Hence, the AAR concluded that it lacked jurisdiction to provide a ruling on this matter.
Conclusion
Based on the above findings, the AAR Karnataka issued the following rulings:
- The question regarding ITC on renting out commercial property was not answered due to its pending status in the Supreme Court.
- The issue of RCM applicability on inward freight was deemed inadmissible as it had already been decided in audit proceedings.
- The query about set-off in cases of multiple businesses under one GST number was beyond the jurisdiction of the AAR to adjudicate upon.
This ruling highlights the specific legal framework and procedural limitations within which the AAR operates, ensuring clarity and compliance in GST matters under the CGST and KGST Acts.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. Srinivas Plywoods, CTS No 122/83, A and B Hubli Building, New Cotton Market, Hubli, Dharwad, Karnataka, 580029 having GSTIN 29AKPPH296 1J1ZN have filed an application for Advance Ruling under Section 97 of COST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The Applicant is a Proprietorship concern registered under the provisions of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The Applicant states that they are engaged in supply of plywood and also into the construction of commercial complex and let it on rent.
3. The applicant has sought advance ruling in respect of the following questions:
a. Input eligibility on renting of commercial Property.
b. Applicability of RCM on freight inward.
c. How to set off Input and Output in a situation where the Applicant is having more than one business done under the same GST Number?
4. Admissibility of the application: The question raised in serial number ‘a’ is about the “admissibility of input tax credit of tax paid or deemed to have been paid;” and question raised in serial number ‘ID’ is about “determination of the liability to pay tax on any goods or service or both” and is admissible under Section 97(2)(d)and 97(2)(e) of the CGST Act 2017 respectively.
However, the question raised in serial number appears to be not covered under section 97(2) of CGST Act 2017, and the same will be discussed in detail in the findings. Hence the Application is admitted partially.
PERSONAL HEARING/ PROCEEDINGS HELD ON 14.03.2024
5. Sri Siddartha S Javali, CA and Duly Authorised Representative of the applicant appeared for personal hearing proceedings held on 14.03.2024 and reiterated the facts narrated in their application.
FINDINGS & DISCUSSION
6. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act.
7. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by the applicant and their submissions made by their learned representative during the time of hearing.
8. The Applicant states that they are constructing a commercial complex and they would like to know whether they can avail input tax credit on building materials purchased and utilised for the construction of the commercial complex.
8.1 The Applicant has referred to M/s. Safari Retreats Private Limited V/ s Chief Commissioner of Central Goods and Service Tax under W P (C) no 20463 of 2018 and stated that the Honrble Odisha High Court has held that “the provision requires to be read down to the extent that Section 17(5)(d) of the CGST Act shall only cover those cases where the ,immovable property is sold after grant of completion certificate since there would not be any further tax incidence. However, since the Petitioner is retaining the property even after completion and letting it out on rental basis, it will be eligible to claim ITC since the subsequent transactions of letting out will be covered by GST.”
8.2 However, the above-mentioned Hon’ble Odisha High Court’s order has been appealed before the Hon’ble Supreme Court of India vide case number C.A. No. 002948 / 2023 and is still pending before the Hon’ble Supreme Court.
The Applicant has sought advance ruling in respect of claiming ITC on building materials purchased and utilised for the construction of commercial complex. Since the same issue is pending before the Hon’ble Supreme Court, the same cannot be answered by this Authority as the case is sub judice.
9. The Applicant wants to know the applicability of RCM on freight inward. An Audit Report dated 13.12.2022 u/s.65 (6) of the KGST & CGST Act, 2017 is issued by the Deputy Commissioner of Commercial Taxes (Audit), Dharwad. The audit objection raised in the audit report pertains to freight and hamali charges for the year July 2017-March 2018. The audit objection raised is that, the Applicant has not paid tax @5% on freight charges. The audit officer has issued proceedings under section 73(9) of CGST Act 2017 for the year July 2017-March 2018 and has stated that the Applicant has not paid the tax pertaining to the above audit objection.
9.1 First proviso to Section 98(2) of the COST Act, 2017, reads as under:
“The Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of applicant under any provisions of this Act”.
The issue raised in the instant application and the audit objection raised in the audit report are one and the same and the same has already been decided in the proceedings. Thus, first proviso to Section 98(2) of the CGST Act 2017 is squarely applicable to the instant case and hence is inadmissible.
10. The Applicant wants to know How to set off Input and Output in a situation where the Applicant is having more than one business done under the same GST Number.
Section 97(2) of the CGST Act 2017 specifies the issues in respect of which the advance ruling can be sought and the same is reproduced below:
97 (2) The question on which the advance ruling is sought under this Act, shall be in respect of,—
(a) classification of the liability to pay tax on any goods or services or both;
(b) application of a notification issued under the provisions of this Act
(c) determination of time and value of supply of goods service or both
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods and services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term
10.1 It could be seen from the above that the authority can’t give any decision on the issues that are not covered under Section 97(2) of the CGST Act 2017. In the instant case the questions at serial No. c’ mentioned in para 3 supra is not covered under the issues specified under Section 97(2) mentioned supra. Thus, the same cannot be answered.
11. In view of the foregoing, we pass the following order:
RULING
a) The issue covered under question ‘a’ cannot be answered as the same is sub judice.
b) The issue covered under question ‘b’ is inadmissible and cannot be answered by this Authority.
c) The issue covered under question ‘c’ cannot be answered as the same is beyond the jurisdiction of this Authority.
