2019 (8) TMI 307 - AAAR - GST

Input tax credit -allowability of discounts on invoice value raised by the suppliers for determination of credit - credit to be allowed on full GST charged on the undiscounted supply invoice or a proportionate reversal of the same is required to be done - post purchase discount given by the supplier to them through the C2FO platform - HELD THAT - A conjoint reading of Sections 15 and 16 leads to the conclusion that a registered person is entitled to 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. This is not the situation here. The buyer has discharged the GST charged on the undiscounted transaction value at the time of 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. Like in the case of rule 3 of Cenvat Credit Rules, 2004 which refers to credit of duty paid by the inputs manufacturer and not duty payable , section 16 of the Act refers to the credit of input tax charged and not chargeable . The appellant M/S MRF Ltd can avail the Input Tax Credit of the full GST charged on the undiscounted supply invoice of goods/ services by their suppliers. A proportionate reversal of the credit is not required to be done by them in case of a post purchase discount given by the supplier to them through the C2FO platform, in the circumstances mentioned by them and discussed above. This is subject to their fulfilling the other conditions stipulated by law and that the GST paid by them for the said goods/ service is not reversed or reimbursed/ re-credited etc to them in any manner by the supplier or on his behalf, after the credit has been availed by M/s. MRP.

Summary

Issues Involved:
1. Eligibility to avail Input Tax Credit (ITC) on the full GST charged on undiscounted supply invoices.
2. Interpretation of Section 16(2) of the CGST Act regarding post-purchase discounts.
3. Applicability of anti-evasion provisions and legislative intent behind Section 16(2).

Issue-wise Detailed Analysis:

1. Eligibility to Avail ITC on Full GST Charged on Undiscounted Supply Invoices:
The appellant, M/S MRF Limited, entered into an arrangement with C2FO India LLP for an automated data exchange platform to facilitate early payment discounts on invoices. The appellant contended that the value of supply for GST purposes should be the full undiscounted value and sought to avail ITC on the full GST charged on the undiscounted invoices. The original authority ruled that ITC could only be availed on the discounted value. However, the appellate authority set aside this ruling, allowing the appellant to avail ITC on the full GST charged, provided the GST paid is not reversed or reimbursed.

2. Interpretation of Section 16(2) of the CGST Act Regarding Post-Purchase Discounts:
The appellant argued that the proviso to Section 16(2) of the CGST Act, which requires payment of the value of supply along with tax within 180 days, should be interpreted to mean the commercially agreed price between the supplier and the recipient. They contended that the legislative intent was to ensure timely payment to suppliers, especially in the MSME sector, and not to deny ITC when the full commercial price is paid. The appellate authority agreed with this interpretation, stating that the provision is an anti-evasion measure and does not apply to cases where the full commercial price and GST are paid.

3. Applicability of Anti-Evasion Provisions and Legislative Intent Behind Section 16(2):
The appellate authority examined the legislative intent behind Section 16(2) and concluded that it is an anti-evasion measure to ensure genuine supplies and timely payment to suppliers. The authority referred to the discussions in the GST Council meetings and CBIC circulars, which supported the view that ITC should be available on the full GST paid, provided the tax is not subsequently reduced or refunded. The authority emphasized that the provision aims to prevent evasion and ensure prompt payment, not to deny ITC when the commercial price and GST are fully paid.

Conclusion:
The appellate authority set aside the original ruling and allowed the appellant to avail ITC on the full GST charged on undiscounted supply invoices, subject to the condition that the GST paid is not reversed or reimbursed. This ruling applies to cases where post-purchase discounts are extended through the C2FO platform, and the appellant fulfills all other legal conditions for availing ITC.