The first financial year under the GST regime is coming to an end but there is no dearth of confusions in the provisions of the law. This series will focus on various issues that are still unanswered. This is the first part and we will talk about the following issue:

Topic ; Input Tax Credit (ITC)

First a brief explanation about what is Input Tax Credit. Input Tax Credit is the tax paid on your purchases which can be availed and utilized to pay taxes on your sales. In this way the person pays taxes only on the value added in his product or service.

In Indian GST Law the tax structure is a dual model. For Intra- State (within a state) Transactions Central GST (CGST) and Respective State GST (SGST) will be levied and for Inter-State (between two states) Transactions Integrated GST (IGST) will be levied.

The levy of CGST & SGST or IGST will be depend upon the location of supplier and the PLACE OF SUPPLY. To determine the place of supply there are comprehensive provisions in the Act. Like for example and relevant for the current issue, the place of supply of services related to immovable property like construction service, architect consultancy, lodging and stay, renting etc. will be the location of property itself.

Now consider a situation where an owner of a firm registered under GST in the State of Uttar-Pradesh travels to Mumbai (Maharashtra) for his business purposes. He stays in a hotel in Mumbai during his business trip. The hotel will charge him CGST and Maharastra GST. Now the question arises whether the person will be eligible to take credits of this service even if he provides the GSTIN of his firm.

The opinions of Consultants are divided on this matter. One category are of the opinion that no credits shall be available on this transactions and to avail the credits the person will have to get registered in Maharashtra. The second category is of the opinion that the person will be able to avail the CGST portion as that has applicability to all over India.

This issue might not hit hard on businesses in general as number of transactions might be less but it will certainly be a problem for people who are engaged in related business like travel agents booking hotels on behalf of customers. A Writ Petition (W. P. (C) 7320/2017) has also been submitted to Delhi High Court citing this issue in the case of D. Pauls Travel & Tours Ltd. Versus Union of India & Another however the final decision is yet to come. The Honorable Court suggested that this issue must be taken by the GST Council and suitable clarifications should be issued. Clarification on this issue is still pending.

The suggestions and opinions of readers are most welcomed. Thank You.

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Qualification: CA in Practice
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Location: Kanpur, Uttar Pradesh, IN
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5 responses to “Input Tax Credit (ITC)- Confusions in GST Law: Part 1”

  1. Sujit Kumar Das says:

    Dear Sir
    Oviously it a critical point the GST council could able to clarify. I have lodged a complian in this respect and it is under process as shown in the site. But in the case (of Maharastra & UP) can we not interpret that: 1. The service was received in the Maharastra and as a registered person, he carried the service of Maharashtra to UP at the time of returning. 2. As the person has provided the GSTIN of UP the Service Provider of Maharastra can charge the IGST and the basic concept of passing of the GST input will then be possible.
    3. in case of unregister recipient the Maharashtra supplier ay charge CGST & SGST.
    4.If there is is a place of business in Maharashtra of the recipient, then the GSTIN of Recipient of Maharashtra may be provided and as an input distributer the same can be transferered to UP (main recipient)
    Thanks, Regs
    Sujit Kumar Das

    • altamush711 says:

      Dear Sujit,
      The service of staying in a hotel gets completed once you check out. You cannot bring it back to UP (in our case). So CGST and Maharashtra GST will be charged.
      Charging of CGST/SGST or IGST depends upon the location of supplier and place of supply.
      Regards
      CA Altamush Zafar

  2. Samir says:

    Same way if we are suppliers of tax free or exempted good then can we claim refund of ITC accumulated on its inputs like packaging materials etc.?

  3. Mohit Pande says:

    Please clarify whether Input Tax Credit can be claimed by Cooperative Housing Society against GST paid on sourcing goods & services for personal consumption by members. If answer is yes please indicate Notification No. and date issued by CBEC.

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