Basic Understanding on CGST & SGST Paid in another State (Inter State Transaction without IGST)

♠ Very often a taxpayer can find himself in a situation where he is possession of Invoices for interstate purchases or interstate expenses incurred by him and he has paid CGST and SGST on such invoices of another state and IGST has not been charged by the suppliers on such invoices.

♠ The question arises is that why CGST and SGST have been charged and IGST has not been charged although it is an interstate transaction. Here we need to understand that GST is supplied based tax. It is levied on the basis of supply made by the supplier. If supply is interstate supply from the point of view of supplier then IGST will be charged and if it is intrastate then CGST and SGST to be charged.

♠ We understand this by an example – Mr. X is registered in the state of Rajasthan as a regular taxpayer. He visits Delhi and Stay there in a Hotel of Taxpayer Mr. Y registered regular taxpayer in Delhi. Now Taxpayer Mr. Y will generate the Invoice in name of Mr. X and charge CGST and SGST in his invoice because the place of supply is Delhi and it is intra state from his point of view.

♠ Now at the time of filling of GSTR 1, this invoice will be uploaded by Mr. B as intra state transaction in B2B transaction and this will also appear in 2A of Mr. A.

♠ However the input of such invoice is not allowed and Mr. A cannot claim ITC of CGST and SGST paid by him in the state of Delhi.

♠ Such credit is allowed only if IGST has been charged by Mr. B in the invoice but this is not possible in this situation because of concept of place of supply.

Important Note:

♠ It is very important to note that such invoices will reflect in the 2A of the taxpayer. However ITC is not available to receiver taxpayer for such invoices.

♠ In Annual Return 9A Table no 8A also excludes this type of invoices where place of supply lies in the state of supplier instead of state of the receiver i.e. Interstate invoices in which CGST and SGST has been charged and IGST has been not charged by the supplier.

♠ Hence received taxpayer is required to give proper treatment to such invoices and Input of such invoices should not be taken in any case because it is not allowed.

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November 2020