In re MRF Limited (GST AAAR Tamilnadu)
The order issued by the original authority for advance ruling is set aside. The appellant can avail Input tax credit of the full GST charged on the undiscounted supply invoice of goods/services by their suppliers. A proportionate reversal of the credit is not required to be done by them in case of a post purchase discount given by the supplier to them through the C2FO platform, in the circumstances mentioned by the appellant. This is subject to their fulfilling the other conditions stipulated by law and that the GST paid by them for the said goods/services is not reversed or reimbursed/ re-credited etc to them in any manner by the supplier or on his behalf after the credit has been availed by the appellant. The ruling is limited to cases where a post purchase discount is extended by the supplier of goods or services to the appellant on account of their registering in the interactive automated data exchange arrangement setup by C2FO India LLP, which is the subject matter of this advance ruling.
Read Also order- ITC on credit note from vendors post supply of goods by vendors: Controversial Ruling
FULL TEXT OF THE ORDER OF AUTHORITY OF APPELLATE ADVANCE RULING, TAMILNADU
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
The subject appeal is filed under Section 100(1) of the Tamilnadu Goods & Services Tax Act 2017/Central Goods & Services Tax Act 2017 (hereinafter referred to the Act’) by M/s. MRF Limited (hereinafter referred to as `MRF’ or ‘Appellant). The appellant is registered under GST vide GSTIN 33AAACM4154G1ZU. The appeal is filed against the Order No.5/AAR/2019 dated 22.01.2019 passed by the Tamil Nadu State Authority for Advance ruling on the application for advance ruling filed by the appellant.
2. The Appellant has stated that they intend to enter into an arrangement with M/s. C2F0 INDIA LLP( hereinafter referred as C2F0), a subsidiary of Pollen Inc, having its Indian Office at, 303, OIA House, 470, Cardinal Gracious Road, Andheri (East), Mumbai — 400099, Maharashtra, India for setting up an interactive automated data exchange which can be installed for data interaction relating to sale & purchase of goods and services between a buyer (the Appellant) and a supplier (any supplier of goods or input services of the appellant) in compliance to various ethical, accounting and business standards. Both the supplier and recipient of goods or services should register on the platform provided by C2F0. The goods and /or services are delivered and the invoice is booked in ERP and marked as approved to pay. The transactions are explained as follows:
> Based on the defined schedule, C2F0 outbound program will extract approved open invoices (remaining unpaid) and Supplier (vendor) data from SAP and transfer the data to C2F0 cloud on AWS (Amazon Web Services).
> Data is first loaded to client SFTP (Secured File Transfer Protocol) staging area. Automated process picks up data from Secure Transfer of invoices Platform (SFTP) to C2F0 AWS S3 cloud.
> Successfully discounted invoice data is sent back to client SFTP staging area.
> The supplier can place discount offer either as APR (Annual Percentage Rate) or flat discount on the C2F0 platform 24×7.
> C2F0 platform alerts Supplier Relationship Manager (SRM) on key trigger points such as supplier activity on the portal to engage with suppliers at the opportune moment.
> Client Finance team provide guidance on desired APR, minimum APR and cash pool. C2F0 algorithms will use these settings to take a decision on which invoices are awarded for early payment by client.
> By accepting C2FO’s Terms and Conditions, the Supplier will be agreeable to offer certain discount in return for an early payment of an Invoice from the recipient of goods or services (i.e., the appellant).
On the online platform C2F0, where post sale, post supply and post issue of invoice depending on the early payment schedule offered by the supplier, the buyer (appellant) can accept discount and make payment. Then a commercial credit note would be issued. The payment would be made one time for each invoice at the discounted price along with the GST paid by the Supplier on the undiscounted value. They state that they do not fall under Section 15(3) (a) or (b) of CGST Act, 2017, hence the value of supply should be full undiscounted value. In the light of the above, they wanted to know whether, when GST is paid on full value by supplier and credit note does not include GST, they can take full ITC on undiscounted value.
3. The Original Authorities has ruled as follows:
“As per the Provisions of Section 16 of the CGST Act 2017/TNGST Act 2017, the applicant can avail input tax credit only to the extent of the invoice value raised by the suppliers less the discounts as per C2FO software which is paid by him to the suppliers.”
4. Aggrieved by the above decision, the Appellant has filed the present appeal. The grounds of appeal are as follows:
> AAR has while interpreting the contents of Section 15 has held that since the discounts are given after the invoices are raised and supply of goods is made, Section 15(3) is not applicable and hence the value of supply in such transactions is the full undiscounted value mentioned in the invoice. The value to be adopted for payment of tax is not in dispute in the present case. The issue taken up with the AAR related to the eligibility to the ITC as a result of such discounts.
> The Impugned Ruling proceeds on a wholly erroneous interpretation of Section 16 of the CGST Act /TNGST Act and ignores the following fundamental aspects:
