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By: Dr. Sanjiv Agarwal
January 19, 2021
All Articles by: Dr. Sanjiv Agarwal       View Profile
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IN RE: M/S. SANGHVI MOVERS LIMITED [2020 (1) TMI 64 - APPELLATE AUTHORITY FOR ADVANCE RULING, TAMILNADU];  dated 13.11.2019, assessee, Sanghvi Movers Ltd. (SML) was engaged in the business of providing medium - sized heavy-duty cranes on rental/ lease/ hire basis to its clients without transferring the right to use the cranes. The applicant had pan-India presence and cranes were deployed across India as per the requirements of customers. The applicant’s Maharashtra Office owned the cranes, and the Chennai Office entered into work order for leasing with operators of their equipment. Rental/ lease without operation work order was entered into between Maharashtra and Chennai office and they raised the invoice with IGST charge under SAC 997319. The applicant was of the view that they would be eligible to claim ITC on IGST charged in such invoices.

It sought Advance Ruling on the following issue:

“Whether on facts and circumstances of the case, since Integrated Goods and Services Tax (IGST) is payable on inter-state movement of cranes by the supplier (i.e. SML, Maharashtra), whether the recipient office of SML (i.e. SML, Tamil Nadu) duly registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit (ITC) of IGST charged?”

The AAR observed that in the instant case, the transaction was an inter-state supply as the supplier is in a different state from the place of supply, the applicant would be paying IGST on their inward supplies from SML-HO. As per Section 20 (iv) of IGST Act, provisions of Central Goods and Services Tax Act relating to input tax credit shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under the Act.

The Authority for Advance Ruling further observed that as per Section 20 (iv) of IGST Act 2017, provisions of Central Goods and Services Tax Act relating to input tax credit shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they were enacted under this Act.

The Authority for Advance Ruling, therefore, ruled vide Order dated 21.06.2019 that on the supplies received from M/s. Sanghvi Movers Ltd., Maharashtra, the applicant M/s. Sanghvi Movers Ltd., Tamil Nadu, was not eligible for the full Input Tax Credit but only to the extent specified in the restrictions as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules read with Section 20(iv) of IGST Act, subject to fulfillment of all other conditions under section 16 of CGST Act, read with Section 20(iv) of IGST ActIN RE: M/S. SANGHVI MOVERS LIMITED [2019 (8) TMI 1009 - AUTHORITY FOR ADVANCE RULING, TAMILNADU].

Being aggrieved by the aforesaid ruling, the assessee preferred an appeal u/s 100 of CGST Act, 2017 before AAAR, Tamil Nadu on the grounds as enumerated in para 4 of the Order.

The AAAR observed from the relevant statutory provisions that :

  • The supply of goods or services to the distinct persons in the course or furtherance of business, even without consideration are taxable supply;
  • A registered person shall be entitled to take credit of input tax charged on any supply to him which are used in the course or furtherance of business if he is in possession of a tax invoice, received the goods or services and the tax charged is paid to the Government and the returns are furnished;
  • When the recipient fails to pay the supplier the amount towards the value of supply along with tax payable within a period of one hundred and eighty days from the date of issue of invoice, the proportionate credit availed is to be added to his output liability;
  • The value of supplies made without consideration as specified in Schedule I of the CGST Act, 2017 is deemed to have been paid for the purposes of availment of ITC.

The issue to be decided was whether the appellant is eligible for the ITC of the entire tax paid by SML-HO in the stated transactions.

The AAAR observed that the appellant in the tax invoice raised on their customers mentions that the payment to be made either by Cheque/DD in the name of ‘Sanghvi Movers Limited’ or directly to the account of SML-HO at Pune. The appellant has represented that the receipts and payables are accounted at the entity level only. The HO being distinct person in the eyes of law and the transaction is in the course of furtherance of business, the supply is taxable supply for which SML-HO has adopted a value agreed under the ‘Pricing’ clause of the MOU and paid the tax on the value declared in the Invoice. The proviso to Rule 37, provides for deemed payment of value in such transactions. Even considering that the said proviso does not have application in the case at hand as there is a value stated in the Tax Invoice as held by the Lower Authority, (AAR). The Appellate Authority found no reason to restrict the Input Tax Credit of the tax paid by the SML-HO, in the hands of the appellant as it has been substantially brought out that the ‘consideration’ stands paid to the SML-HO either by the customer of the Appellant or by setting off against the payables of the appellant to SML-HO, in respect of lease/ hire of Cranes, etc which was as per the established accounting principles. Therefore, the AAAR did not find any reason to restrict the eligibility of ITC credit under Section 16 (2) of the Act which overrides other sub-sections of this provision.

The AAAR, therefore, modified the ruling of the Advance Ruling Authority and held that the appellant is eligible to avail full Input tax credit of tax paid by SML-HO on the lease/ hire of cranes to them for furtherance of business, subject to other conditions of eligibility to such input tax credit as per Section 16 of CGST/TNGST Act 2017.


By: Dr. Sanjiv Agarwal - January 19, 2021



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