2019 (2) TMI 1082 - AAR - GST

Input tax credit - when the credit will be available - time of supply vis- -vis raising the tax invoice to actual supply of goods. Input tax credit - sale invoices which are raised in the end of month by the seller; but the material arrives at the end of the purchaser in the next month - applicant submitted that in the view of the given facts, co-read with the provisions discussed above, the applicant will be entitled the claim the Input Tax Credit in the same month in which the invoice is raised tax is deemed to be paid by the supplier who has delivered the goods to the transporter for transporting the same to the recipient's destination - Held that - In case of invoices being raised by supplier in previous month and goods being received in the succeeding month, input tax credit on goods so received shall be available to the applicant, only when applicant has received the goods. Input tax credit - applicant, in the month end; to meet the monthly sale targets (high volume) raises the invoice/s to the end customer/s, deposit the due tax on the raised invoices BUT before receiving the physical delivery of goods from its supplier since the goods are in transit (as discussed above) and makes the delivery of goods only after receiving the same in the next month - applicant submitted that the applicant will be under liability to pay the tax in the same month in which the invoice is raised and tax is collected by him even though he is not in physical possession of goods to be delivered under invoice delivery/supply of goods is to take place at later stage to end customer - Held that - The liability to pay tax shall arise on the basis of time of supply, which in case of supply of goods is earlier of the following dates (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.

Summary

Issues:
1. Input Tax Credit on goods received in a different month from when the invoice is raised.
2. Liability to pay tax based on the time of supply of goods.

Issue 1: Input Tax Credit on goods received in a different month:
The applicant, a retail trading business, faced a challenge where goods purchased from a supplier remained in transit for 5-10 days, leading to a delay in booking purchases for the next month. The question was about claiming Input Tax Credit (ITC) when the invoice is raised by the seller in the previous month but goods are received in the next month. The applicant argued that as per CGST/HGST Act, they should be entitled to claim ITC in the same month as the invoice, as the tax is deemed paid by the supplier upon delivery to the transporter. However, the Deputy Excise & Taxation Commissioner emphasized that ITC can only be availed upon physical receipt of goods, and the law requires the registered person to be in possession of goods for ITC. The Authority ruled that ITC on goods is only available when the applicant physically receives the goods.

Issue 2: Liability to pay tax based on the time of supply of goods:
The applicant also raised a concern about issuing invoices to end customers before receiving physical delivery of goods due to monthly sales targets and incentives. They argued that tax liability arises when the invoice is raised and tax is collected, even if physical possession of goods is pending. The Authority referred to Section 12 of the CGST/HGST Act, stating that the time of supply of goods is determined by the date of issue of the invoice by the supplier. Therefore, in cases where invoices are issued before goods are delivered, the date of the invoice is considered the time of supply for tax purposes. The Authority concluded that the liability to pay tax is based on the time of supply, which is the date of the invoice issuance, even if physical delivery of goods occurs later.

In summary, the Authority ruled that Input Tax Credit on goods is only available upon physical receipt, and the liability to pay tax is determined by the time of supply based on the invoice issuance date. The decision clarifies the tax treatment in scenarios where goods are in transit between invoice issuance and physical receipt, providing guidance on claiming ITC and determining tax liability accurately.