TMI Blog2023 (6) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... on the same. The applicant is issued commercial credit note or financial credit notes under various schemes such as turnover discount, quantity discount, additional scheme discount etc. The credit. notes issued are without GST and as per the applicant were issued only for accounting purpose as also given in undertaking by the supplier. The credit notes are duly accounted in the book of accounts of the applicant and also in their income tax returns - For the applicability of provisions of 15 (3) (b) there should be prior agreement and a link established with the relevant invoices of the discount given. No such co-relation between the credit notes issued by the supplier to the applicant is found except credit note mentioning the scheme and the goods for which the credit note is being given. In absence of such specific Information, the benefit of lessening the value of discount from the transaction value as per the provisions of 15 (3) (b) is not allowed and therefore the contention of the applicant is correct. However, it is pertinent to note that the financial credit note shall not be used as a conduit to transfer input tax credit fraudulently, by raising an Invoice for a higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of consideration as per tax invoice for the goods received from the supplier. 3.5 The applicant has received various incentives, in the nature of discounts from its supplier, viz. Turnover Discount, Quantity Discount, Cash Discounts, Additional Scheme Discounts, 3 Months regular scheme discounts, etc. year wise from effective date of registration till date. All the above discounts are in the form of after sale discounts. For the above-mentioned discounts, the supplier has raised financial/ commercial credit note without GST for accounting purpose only. The financial Credit Notes were accounted for by the Applicant and also disclosed by distributors in their Income Tax returns. Further, supplier does not reduce its output tax liability in respect to said Financial/commercial Credit Notes, as Section 15 doesn't permit to exclude Post Supply Discount from transaction value. Supplier also filed affidavit stating that they don't reduce GST liability on account of financial/commercial credit note. 4. Questions raised before the authority: The applicant seeks advance ruling on the following: 1. Whether the applicant is duly eligible to take full cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (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 utilization of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39 : Provided that where the goods against an invoice are received in lots or Instalments, the registered person shall be entitled to take credit upon receipt of the last lot or Instalment: Provided further that where a recipient falls to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period 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 : (emphasis supplied) Provided also that the recipient shall be ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion that a registered person is entitled Lo take full credit of the input tax charged on the supply of goods or services or both. The provisions of the second proviso to Section 16 (2) would come into play only where the buyer/recipient fails to pay the supplier of goods the amount towards the value of the supply. In the circumstances, if the GST charged and paid is not reversed/refunded in whole or part subsequently in any manner or circumstances, the credit availed on the same need not be reversed. In this regard, reliance is placed on the decision of Appellate Authority for Advance Ruling in MRF Ltd reported at 2019-TIOL-61-AAAR-GST = 2019 (27) G.S.T.L. 578 (App. A.A.R.- GST). Thus, the applicant is of the opinion that ITC need not be reversed on account of commercial/financial credit note, in view of the above rule position. 5.6 The applicant submits that, as per Circular No. 122/3/2010, dated 30-4-2010 issued by CBEC in the context of Rule 4 (7) of the Cenvat Credit Rules, 2004 in respect of Services, states as follows: In the cases where the receiver of service reduces the amount mentioned in the invoice/bill/challan and makes discounted payment, then it should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of reduction in price. D. SAME IS ALSO EVIDENT FROM THE C.B.E. C. FLYER NO. 19, DATED 1-1-2018 1. Any registered person can avail credit of tax paid on the inward supply of goods or services or both which is used or intended to be used in the course or furtherance of business. 2. The prerequisites for availing credit by registered person are: (a) He is in possession of tax invoice or any other specified tax paying document (b) He has received the goods or services. Bill to ship to scenarios also included (c) Tax is actually paid by the supplier (d) He has furnished the return (e) If the inputs are received in lots, he will be eligible to avail the credit only when the last lot of the inputs is received (f) He should pay the supplier the value of the goods or services along with the tax within 180 days from the date of issue of invoice, failing which the amount of credit availed by the recipient would be added to his output tax liability, with interest [rule 37(1) (2) of CGST Rules, 2017]. However, once the amount is paid, the recipient will be entitled to avail the credit again. In case part payment has been made, proportio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of such supply and there is a link to the invoices of the discount given. Further, the ITC attributable to the discount is to be reversed by the recipient of the supply. 7.3 On examination of the transaction between the applicant and their supplier, M/s Gold Medal, it is found that the supplier is issuing a tax invoice on the supply of goods to the applicant and the applicant is taking ITC on the same. The applicant is issued commercial credit note or financial credit notes under various schemes such as turnover discount, quantity discount, additional scheme discount etc. The credit. notes issued are without GST and as per the applicant were issued only for accounting purpose as also given in undertaking by the supplier. The credit notes are duly accounted in the book of accounts of the applicant and also in their income tax returns. 7.4 For the applicability of provisions of 15 (3) (b) there should be prior agreement and a link established with the relevant invoices of the discount given. No such co-relation between the credit notes issued by the supplier to the applicant is found except credit note mentioning the scheme and the goods for which the credit note is being gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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