Analysis of GST Council’s Decision on Clarification on availability of Input Tax Credit as per section 16(2)(b) of CGST Act, 2017 in respect of goods which have been delivered by the supplier at his (supplier’s) place of business; & Impact of Place of Supply u/s 10(1)(a) & (b) of IGST Act

[Vivek Jalan]

Decision:

Clarification on availability of Input Tax Credit as per section 16(2)(b) of CGST Act, 2017 in respect of goods which have been delivered by the supplier at his (supplier’s) place of business : The GST Council recommended to clarify that in an Ex-Works contract, where goods are delivered by the supplier to the recipient or a transporter at the supplier's place of business, and the property in goods transfers to the recipient at that point, the goods are considered to be "received" by the recipient under section 16(2)(b) of CGST Act, 2017 and the recipient may claim Input Tax Credit (ITC) on such goods, subject to the conditions outlined in Sections 16 and 17 of the CGST Act, 2017.

Our Comments:

Section 16(2)(b) provides -

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,--

(b) he has received the goods or services or both.

 ¹[Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services--

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

 (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.]

Hence, as per explanation to Sec 16(2)(b) It would construed that transfer of property is passed on by the supplier to the recipient and he has received the goods where the goods are delivered by the supplier to a transporter or another person before movement of goods. Therefore, the recipient may claim ITC on date of such ‘receipt’.

However, we draw the attention to Section 10(1)(a) & 10(1)(b) of IGST Act which state as follows -

10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,--

(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;

(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

Hence, the place of supply for Ex-Works should thus be the supplier’s place and CGST+SGST should be chargeable as per Section 10(1)(a) of IGST Act.