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TMI Blog2019 (3) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the Company) is registered under the applicable provisions of the CGST 2017 and TNGST 2017 vide registration number 33AAACM4154G1ZU. They have preferred an application seeking Advance Ruling on "Whether the MRF Ltd can avail the ITC of the full GST charged on the supply of invoice or a proportionate reversal of the same is required in case of post purchase discount given by the supplier of the goods or services." The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted the copy of Challan evidencing payment of application fees of Rs. 5,000/-each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The Applicant has informed that they intend to enter into an arrangement with M/s. C2FO INDIA LLP ( hereinafter referred as C2FO), a subsidiary of Pollen Inc, having its Indian Office at, 303, OIA House, 470, Cardinal Gracious Road, Andheri (East), Mumbai 400099, Maharashtra, India for setting up an interactive automated data exchange which can be installed for data interaction relating to sale & purchase of goods and services between a Buyer (the Applicant) and a Supplier (any supplier of goods or input services of thc Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the discount will be processed by the recipient of the goods or services. This discount arrangement is not part of the Purchase Contracts or the invoices since it is not known at that point of time whether supplies against the purchase contracts or invoices will be considered for the discount and also the rate / quantum of such discount is not known. It is a case of offering discount post supply falling under "Cash Discount not agreed before or at the time of supply". 2.3 The Applicant stated that as per Section 15(3) of CGST Act, discount in this case is not allowable for deduction from the price at the time of supply since the same is known either before or at the time of supply. The taxable value for the purpose of payment of GST will be the value as per purchase contract without considering such discount so offered and the supplier is liable to pay tax on the value before discount. As per Section 16(2), a person who fails to pay to the supplier of goods, the amount towards the value of supply along with the tax payable within a period of 180 days from date of invoice, ITC taken by him shall be added to the output tax liability. Value of supply is the value on which G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted a write up/ brochure of the software C2FO along with screenshots of the C2FO software prepared for their internal use. 4.1 We have gone through the submissions made by the Applicant. It is seen from the brochure of C2FO that the SAP system of MRF will be interfaced with the cloud server of C2FO.The invoices for receipt of goods or services received by the Applicant are uploaded onto the system. The vendors, registered on the C2FO software platform, place discount offer, either Annual Percentage Rate or flat discount to receive early payment. The C2FO algorithms use settings of desired annual percentage rate, minimum Annual percentage rate, cash availability to decide on which invoices are chosen for early payment. This process happens continually in which the discount offers can be varied by the vendors which would determine the amount and date of payment for each of these invoices. Screenshots of the software pertaining to the Applicant shows that the Applicant can set a desired annual percentage rate either monthly or quarterly and also set the cash availability monthly. This cash availability can be replenished periodically. It displays the suppliers who are participa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent. , as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. Section 12 of CGST Act states: 12. (1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section. (2) The time supply goods shall be the earlier of the follozving dates, namely:- (a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply: Section 15 (3) of CGST Act states (3) The value of the supply shall not include any discount which is given- (a) before or at the time of the supply if such discount has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. 4.3 Section 16(1) states that a registered recipient is eligible to take credit on the input tax charged on any supply of goods or services. As per Section 9(1) of the act, CGST tax is leviable on the value of supply as determined by Section 15 of the Act. Section 15 (3) states that value of supply does not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply and those discounts given after the supply has been effected, if such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices and input tax credit as is attributable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with interest thereon, and the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. In the instant case, the value of supply is the full undiscounted value indicated in the tax invoice and the recipient / Applicant only makes payment to the extent of invoice value less the discount thrown up by the C2FO software. As per proviso to Section 16, the recipient is entitled to avail the credit of input tax on the payment made by him alone and if any amount is not paid as per the value of supply and the recipient has availed full input tax credit, the same would be added to his output tax liability. Therefore, in the instant case, the Applicant can avail Input Tax Credit only to the extent of the invoice value less the discounts asper C2FO software. If he has availed input tax credit on the full amount, he should reverse the difference amount equal to the discount, to avoid adding to his output liability. 5. In view of the above, we rule as under: RULING As per the Provisions of Section 16 of the CGST Act 2017 /TNGST Act 2017, the Applicant can a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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