2020 (12) TMI 273 - AAR - GST

Scope of Advance Ruling application - section 97(2) of the CGST Act, 2017 - Input Tax Credit - rejection solely on the ground that the tax collected by the supplier of the raw material from the applicant is not paid to the government in cash and also on the ground that the tax collected by the supplier of the raw material from the applicant is paid to the government through utilization of ineligible input tax credit - HELD THAT - All the cases pertain to a scenario where tax has not actually been paid. Even in cases where tax has been paid by the supplier to the government through in-eligible input tax credit it would always deemed not to have been paid as tax has not actually been paid to the government. When the applicant is sure as is evident in the application that tax has not been paid in cash or has been paid through ineligible input tax credit, it clearly implies that either tax has not been paid or deemed not to have been paid. Therefore, in all the mentioned cases, it can not be regarded as tax paid to the government by any stretch of mind. Thus, in view of the provisions laid down in section 97(2) of the CGST Act, 2017 encompassing the specific questions, which are sought under advance ruling, it can decisively be inferred that the questions raised by the respondent before Advance Ruling Authority were beyond the scope and jurisdiction of Advance Ruling, and hence do not warrant any ruling thereon and therefore in view of the provisions of Section 97 of the CGST Act, 2017, this authority is not allowed to answer the subject question. The subject application filed for advance ruling is rejected, as being non-maintainable as per the provisions of the CGST Act, 2017 and Rules made there thereunder.

Summary

Issues Involved:
1. Whether the input tax credit availed by the applicant is subject to rejection if the tax collected by the supplier is not paid to the government in cash.
2. Whether the input tax credit availed by the applicant is subject to rejection if the tax collected by the supplier is paid to the government through ineligible input tax credit.

Detailed Analysis:

Issue 1: Rejection of Input Tax Credit if Tax is Not Paid in Cash
Applicant's Contentions:
- The applicant, a partnership firm engaged in manufacturing iron and steel items, procures raw materials from registered suppliers and ensures compliance with GST provisions.
- To safeguard against non-compliance by suppliers, the applicant matches the details of inward supplies with the supplier’s outward supply returns (GSTR 1) before making tax payments.
- The applicant fulfills all conditions under Section 16(2) of the CGST Act, 2017, including possession of tax invoices, receipt of goods, and ensuring the tax charged is reported in the supplier's returns.
- The applicant argues that they have no mechanism to verify if the supplier has actually paid the tax to the government and relies on the reflection of the tax in their GSTR 2A as evidence of payment.

Revenue Department's Contentions:
- The department contends that the determination of the place of supply is not covered under Section 97(2) of the CGST Act, and hence the application should be rejected.
- The department also highlights that the issue pertains to non-payment of tax by the supplier, which falls outside the purview of advance ruling as per Section 97(2)(d) of the CGST Act.

Observations and Findings:
- The authority observed that the questions raised pertain to scenarios where tax has not actually been paid or is deemed not to have been paid.
- Section 97(2)(d) allows advance rulings on the admissibility of input tax credit where tax has been paid or deemed to have been paid. However, in this case, the tax has not been paid, making the application non-maintainable.

Conclusion:
- The application for advance ruling on this issue is rejected as it falls outside the scope and jurisdiction of the Advance Ruling Authority under Section 97(2) of the CGST Act, 2017.

Issue 2: Rejection of Input Tax Credit if Tax is Paid Through Ineligible Input Tax Credit
Applicant's Contentions:
- The applicant ensures that the tax collected by the supplier is reflected in their GSTR 2A before availing input tax credit, assuming the tax is deemed to be paid.
- The applicant argues that they cannot verify if the supplier has used ineligible input tax credit to pay the tax and relies on the reflection in GSTR 2A as sufficient compliance.

Revenue Department's Contentions:
- Similar to the first issue, the department contends that the matter of tax not being paid or being paid through ineligible input tax credit is beyond the scope of advance ruling under Section 97(2)(d).

Observations and Findings:
- The authority noted that even if the tax is paid through ineligible input tax credit, it is deemed not to have been paid. Therefore, the issue does not fall under the admissibility of input tax credit where tax has been paid or deemed to have been paid.
- The questions raised by the applicant are beyond the scope of advance ruling as per Section 97(2) of the CGST Act, 2017.

Conclusion:
- The application for advance ruling on this issue is also rejected as it does not fall within the jurisdiction of the Advance Ruling Authority under Section 97(2) of the CGST Act, 2017.

Order:
The application for advance ruling is rejected as non-maintainable under the provisions of the CGST Act, 2017, and the rules made thereunder.