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2023 (2) TMI 872 - AAR - GSTReversal of Input Tax Credit - sale of alcoholic liquor for human consumption effected by it at its premises - Section 17(2) of the CGST Act read with Rule 42 of the Central Goods and Services Tax Rules, 2017 - HELD THAT:- The sale of alcoholic liquor for human consumption is a supply under the GST Act on which tax is not leviable. A supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act is defined as Non-taxable supply in clause (78) of section 2 of the GST Act. Thus, sale of alcoholic liquor for human consumption shall be treated as non-taxable supply - Further, exempt supply as defined in clause (47) of section 2 of the GST Act includes non-taxable supply. A conjoint reading of section 2(47) and 2(78) thus denotes clearly that the aforesaid supply would also be treated as exempt supply under the GST Act. Sub-section (2) of section 17 of the GST Act read with rule 42 of the GST Rules allows a registered person to utilize input tax credit to the extent of input tax paid on inputs and input services that are used for making taxable supplies including zero-rated supply. Credit of input tax attributable to ‘exempt supplies’ is to be reversed as per the prescribed formula - As it is held that the activities of selling of alcoholic liquor for human consumption by the applicant would be treated as ‘non-taxable supply’ and therefore falls under the category of ‘exempt supply’ under the GST Act, the applicant is required to reverse input tax credit attributable to the exempt supply under sub-section (2) of section 17 of the GST Act read with rule 42 of the GST Rules. Applicability of maxim Quando aliquid prohibetur fieri, prohibetur ex directo et per obliquum - applicant contends that reversal of input tax credit would other way mean discharging of GST liability on output supply of alcoholic liquor for human consumption - HELD THAT:- The statutory scheme, as envisaged under the Act requires reversal of tax which is charged on inward supply of goods or services or both. Input tax is totally different and distinct from outward supply. Since tax is not leviable on supply of alcoholic liquor for human consumption under the GST Act, there cannot be any inward supply to the applicant of the said item on which tax is to be charged by its supplier or the applicant is liable to pay tax under reverse charge mechanism - the reversal of tax charged on inward supplies which are altogether different from outward exempted supplies of alcoholic liquor for human consumption would no way lead to discharging of GST liability on outward supply.
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