Why GST Notification No.1/2018-Central Tax (Rate) Dt.18.01.2018 Denies ITC on Out Put Services Falling Under Sac 9987(Ii) to harm Repairs & Maintenance Service Industry?
1. The above said Notification fixing the rates of CGST has amended Notification No. 11/2017-Central Tax (Rate) dt.28.06.2017, taking away the ITC on “Inputs” and Input Services” used exclusively in respect of supply of output services falling under Chapter 9987(ii), namely “Maintenance, Repair and Installation (except construction) services”—Pl refer Para No.25 of Notification No. 1/2018 dt. 18.01.2018 mentioned in the title.
2. Column No 4 of Para No.25 of this Notification leaves the CGST rate UNCHANGED at 9%.
3. Col No.5 of Para No.25 of this Notification “Condition” says—“Provided that credit of input tax charged on goods and services has not been taken [Please refer to Explanation No. IV (of Notification No. 11/2017 dt.28.06.2017).
4. Clause (iv) of the Explanation 4 to Notification No. 11/2017 dt.28.06.2017 says “wherever a rate of tax has been prescribed in this Notification subject to the condition that credit of input tax charged on goods or services used in supplying the service has not been taken, it shall mean that,–
(a) credit of input tax charged on goods or services used exclusively in supplying such services has not been taken”
5. The output supply of service of “maintenance, repair and installation(except construction) services falls under 99 87(ii).
5.1. Notification No. 1/2018 mentioned above has taken away the entitlement of the industry to avail ITC on inputs and input services [goods and services] used exclusively for providing our output service under the SAC9987(ii).
5.2. The Notification has chosen NOT to offer any justification or logic for doing this.
6. THE PROVISIONS IN THE CGST ACT,2017 IN RELATION TO INPUT TAX CREDIT,–
6.1. Section 16 (1) confers an absolute right to avail ITC on registered persons, on input tax charged on supply of goods or services or both to him which are used or intended to be used IN THE COURSE OR FURTHERANCE OF HIS BUSINESS .
6.2. It also says “and the said amount SHALL be credited to the electronic credit ledger of such person”.
6.3. The only conditions or restrictions on this right are those prescribed in Sections 16(2), 16(3), 16(4), Section 41 and Section 49.
7. THIS NOTIFICATION IS THEREFORE ULTRA VIRES THE CGST ACT,2017
7.1. By taking away the right conferred by the Act, has not the Notification No.1/2018 dt.18.01.2018 travelled far beyond the delegated powers, thereby rendering it ULTRA VIRES the Act itself.
7.2. The industry has to get this Notification quashed by filing a writ in the jurisdictional High Courts.
(Author is Director of Chidambaram Shipcare Pvt.Ltd., Chennai)
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Mr Iyerji,
The condition of non availability of ITC benefit is restricted to Sl.No. 25(i) only which attract 2.5% +2.5% .
For Sl No.25(ii) there is no ITC Non-availment condition. The entry reads as under:
(ii) Maintenance, repair and installation
(except construction) services, other than (i)
above.–Rate of Tax is 9%.
Condition : Nil.
In other words for the entry at Sl.No. 25(ii) there is no condition attached. For Maintenance and repair services (others) who pay 9% + 9% are at liberty to avail ITC benefit.
Please refer the entries again.