2021 (10) TMI 1120 - AAR - GST

Input Tax Credit - option to pay GST at concessional rate availed - other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc. - N/N. 8/2018- Central Tax (Rate) dated 25/01/2018 - HELD THAT - From a reading of the said notification it is seen that the concessional rate under the notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods. In other words, since the applicant has been availing the benefit of the said notification and paying GST at a concessional rate, they shall not avail Input Tax Credit. Other issues are withdrawn by the applicant - application disposed off.

Summary

Issues Involved:
1. Calculation of margin on sale of second-hand goods.
2. Tax calculation on margin or inclusive of tax.
3. Input Tax Credit on indirect expenses.
4. Opting for composition scheme based on previous year's margin.

Issue 1: Calculation of Margin on Sale of Second-Hand Goods:
The applicant sought clarification on whether the margin calculation should be based on (A) Sales price - Purchase price or (B) Sales price - (Purchase price + Processing cost). The concerned officer referred to Rule 32(5) of the CGST Rules, stating that for second-hand goods with no input tax credit claimed on purchase, the margin is Sales Price - Purchase Price. The applicant withdrew this question during the final hearing.

Issue 2: Tax Calculation on Margin or Inclusive of Tax:
The applicant inquired whether tax should be calculated on the margin or if the margin already includes tax. The officer clarified that tax is to be calculated on the margin. However, the applicant withdrew this question before the final hearing.

Issue 3: Input Tax Credit on Indirect Expenses:
The main contention was whether the applicant could claim Input Tax Credit on indirect expenses like rent, commission, professional fees, and telephone costs. The officer highlighted that while the applicant was paying GST at a concessional rate under Notification No. 8/2018, they could not claim Input Tax Credit on such expenses. This question was answered in the negative.

Issue 4: Opting for Composition Scheme Based on Previous Year's Margin:
The applicant raised a query regarding opting for the composition scheme for the next financial year based on the margin of the previous year. The officer explained that for aggregate turnover calculation, the selling price is considered, and if it exceeds 1.5 crores, the applicant cannot opt for the composition scheme. The applicant withdrew this question as well.

In conclusion, the Authority for Advance Ruling, Maharashtra, addressed the queries raised by the applicant concerning the calculation of margin on second-hand goods, tax implications, Input Tax Credit on indirect expenses, and eligibility for the composition scheme based on the previous year's margin. The final ruling clarified the application of Input Tax Credit on indirect expenses and the limitations under Notification No. 8/2018, while the other questions were withdrawn by the applicant during the proceedings.