ITC denied due to Incorrect Place of Supply, Goods and Services Tax - GST

[PARTH MEHTA]

A taxpayer registered in Tamilnadu has purchased goods from Maharashtra. As per POS rules, the POS is in Tamilnadu due to goods involving movement.

However, the supplier has mistakenly mentioned POS as Madhya Pradesh. Now the Tamilnadu State Tax officer is denying to allow this ITC since Tamilnadu state has not got share of revenue from IGST charged due to POS mentioned as MP.

Taxpayer has fulfiled all the conditions of section 16 incl especially:

I. 16(2)(aa) =the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note in the manner specified under section 37

Since the the details are reflected in 2A and 2B

II., and most importantly 16(2)(c)=subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;

Since, supplier has filed R1 and 3B and paid tax. Only POS mistake.

Experts to please guide since his view does not appear to be supported by the law and he needs us to substantiate apart from citing of section 16.

Posts / Replies

[YAGAY andSUN]

The denial of Input Tax Credit (ITC) by the Tamil Nadu GST officer on account of an incorrect place of supply (POS) mentioned by the supplier appears to be legally untenable. In the present case, the goods were supplied from Maharashtra to Tamil Nadu, involving movement of goods, and as per Section 10(1)(a) of the IGST Act, the place where the movement of goods terminates for delivery is the place of supply, which in this case is Tamil Nadu. The supplier’s inadvertent error in mentioning Madhya Pradesh as the POS is a procedural lapse that should not affect the recipient’s eligibility to claim ITC. The taxpayer has satisfied all conditions under Section 16 of the CGST Act, particularly clause (2) (aa), as the invoice is reflected in GSTR-2A/2B, and clause (2)(c), since the tax has been duly paid to the government by the supplier through GSTR-3B.

There is no provision under the CGST or IGST Acts that restricts ITC on the grounds of incorrect POS, where the substantive conditions of eligibility are otherwise fulfilled. The CBIC, through Circular No. 170/02/2022-GST dated 06.07.2022, has clarified that procedural lapses by suppliers should not lead to denial of ITC if the underlying supply is genuine and tax has been paid. Moreover, courts have consistently held that ITC cannot be denied for errors on the part of the supplier. For instance, the Calcutta High Court in the case of Suncraft Energy Pvt. Ltd. - 2023 (8) TMI 174 - CALCUTTA HIGH COURT held that ITC cannot be disallowed solely due to a wrong POS indicated by the supplier, provided the tax has been remitted. Similarly, the Madras High Court in D.Y. Beathel Enterprises - 2021 (3) TMI 1020 - MADRAS HIGH COURT ruled that a bona fide recipient cannot be penalized for the supplier’s non-compliance when the recipient has fulfilled all statutory conditions.

Hence, the taxpayer is entitled to ITC, and the denial solely on the ground that Tamil Nadu did not receive its share of IGST revenue is contrary to the GST law and settled judicial interpretation. A formal representation or appeal should emphasize these legal grounds, asserting that ITC cannot be denied due to a procedural mistake not attributable to the recipient, especially when there is no revenue loss to the exchequer.

[Alkesh Jani]

Shri

I am in agreement with the reply given by our experts as it will help you contest the case legally. Well it is not clear that where POS as been mentioned wrong i.e. in Invoice on any other documents, if so is the GSTIN mentioned correctly etc. Further, in terms of Section 155 of CGST/SGST Act, 2017 read with Section 20 of IGST Act, 2017, the onus is on the person taking the ITC. Thus, please collect all the documents such as E-way Bill, Transporters details if possible Toll plaza receipt and the entry of receipt of goods at the registered place of business.

Thanks

[PARTH MEHTA]

Thanks both the experts for sharing your views.

@Alkesh Ji | Question is not on genuineness of the transaction or receipt of goods in TN. It's solely on account of Wrong POS in R1 of supplier that tax is paid to wrong State. GSTIN in Invoice, EWB, Transport, etc. is correct. POS is incorrect in both R1 and Invoice.

STO is not convinced since there's no direct judgement of Madras HC. He agrees with section 16 compliance but he reads/adds in 16(2)(c) to mean tax should have been paid to TN.