Whether tax paid on intra-state inward supply in one state can be used to pay output tax liability in another state.

INTRODUCTION:- Many Businessman come across the transaction where he received the Intra state supply and paid GST (i.e. CGST & SGST) in a state where he does not have GST Registration.

Now Question is raised that whether ITC of such GST paid (i.e. CGST & SGST) in other state can be used for pay output liability in a state where is has a registration?

E.g.:- A businessmen registered in Maharashtra would book a hotel in Gujarat for attending a business meeting and pay CGST and Gujarat SGST on the said booking. Such businessmen would also ensure that the hotel tax invoice carries his Maharashtra address as well as GSTIN as per the statutory requirement even though the tax charged is not IGST.

ANALYSIS:- GST is destination based tax (i.e. GST is charged in the state where supplies are consumed), So we have to look two aspect of GST,

1. Levy of Tax which is based on taxable event called as Supply.

2. Availment of ITC.

Levy of Tax:-

In case of inter-state supply levy is u/s 5(1) of IGST Act, 2017.

In case of intra-state supply levy is u/s 9(1) of CGST Act, 2017 as well as parallel provisions u/s 9(1) of respective SGST Act, 2017.

Hence as far as Levy is concerned it is separate under each Act.

Availment of ITC:- Now we have to understand that Whether ITC is also separated under each Act,?, In Other Words,

It is mandatory to claim ITC of CGST under CGST Act, 2017?

It is mandatory to claim ITC of IGST under IGST Act, 2017?

It is mandatory to claim ITC of SGST under respective SGST Act, 2017?

To answer the above question we need to understand below mentions definitions of GST Act, 2017.

Input Tax:- As per Section 2(62) of CGST Act, 2017 “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him.

Above definition it is observed that ITC is linked with registered person (i.e. It is immaterial whether he has registration in other state or not).

Also word “any Supply” would mean it can be a Intra-state supply OR It can be a Inter-state supply.

State Tax:- As per Section 2(104) of CGST Act, 2017 “State tax” means the tax levied under any State Goods and Services Tax Act.

Here also definition clearly state that “any state” that means tax charged by any state, and not just the state where the registered supplier is registered, will be the ITC of SGST for the registered person.

Now understand the Section 16(1) of CGST Act, 2017.

Section 16(1) of CGST Act, 2017 provides that every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any 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 and the said amount shall be credited to the electronic credit ledger of such person.

In light of the above provision it can be conclude that every registered person is entitled to take credit of INPUT TAX (as defined above) in respect of CGST & IGST & SGST (charged by any State) and in respect of any supply (i.e. Intra-state or Inter-state Supply.) provided such supply is used for further course of business and credited to electronic credit ledger.

Further IGST Act, 2017 take over certain provision of CGST Act, 2017 which includes INPUT TAX Credit (i.e. Section 16), Hence Registered person can avail ITC of any Tax under any Act, i.e. IGST Act, 2017 or CGST Act, 2017.

Conclusion:

Combined reading of Section 16(1) of CGST Act, 2017 and definitions it is conclude that registered person can avail ITC (IGST & CGST & SGST) u/s 16(1) of CGST Act, 2017 and not separately under respective Act’s.

Disclaimer:  This is strictly my personal opinion. Above discussion cannot be considered as our professional or legal advice. Users shall consider legal provisions or take advice from experts before taking action on it.

However as per the West Bengal AAR Decision in case of Storm Communications Pvt. Ltd. it has been ruled that SGST & CGST paid on intra-state inward supply, in any state other than registered state, cannot be used for pay output liability of GST of Registered state.

Storm Communications Pvt. Ltd. (AAR West Bengal) Advance ruling No.:- 39/WBAAR/2018-19. Dated 28.01.2019.

Author Bio

Qualification: CA in Practice
Company: Amit D Harkhani & Associates
Location: Thane, Maharashtra, IN
Member Since: 28 Jan 2021 | Total Posts: 5
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3 Comments

  1. bhavin rajyaguru says:

    As per my understanding, there are following two criteria.
    1 When Service provided to a registered person: The place of supply shall be the location of such registered person. In above example the location of registered person is Maharashtra. So,Service provider charged IGST.

    2 When service provided to a person other than registered person then the place of supply will be the location of service provider. In this case its is Gujarat. – CGST- SGST charged.

    3 In this case Service provider cannot issue a invoice with CGST- SGST having recipient’s GSTN of Maharashtra. He can issue invoice with CGST-SGST to a unregistered person.

  2. Srikant Agarwal says:

    We know SGST Act deals with GST of the state and intra state supply only.
    Hence if Maharashtra SGST Act says a registered person it would imply registered person in the state of Maharashtra.
    Beside it one cannot take credit unless the same is reflected in GSTR 2A.
    A Hotel in above example can never show registration number of other state while filling GSTR1 as putting of other state GST number implies IGST supply whereas as per the place of supply rule same has to be intra state.
    Hence I would clearly differ from opinion of author.

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