Confusions in GST Law: Part 1

[Altamush Zafar]

The first financial year under the GST regime is coming to an end but there is no dearth of confusions in the provisions of the law. This series will focus on various issues that are still unanswered. This is the first part and we will talk about the following issue:

Topic ; Input Tax Credit (ITC)

First a brief explanation about what is Input Tax Credit. Input Tax Credit is the tax paid on your purchases which can be availed and utilized to pay taxes on your sales. In this way the person pays taxes only on the value added in his product or service.

In Indian GST Law the tax structure is a dual model. For Intra-State (within a state) Transactions Central GST (CGST) and Respective State GST (SGST) will be levied and for Inter-State (between two states) Transactions Integrated GST (IGST) will be levied.

The levy of CGST & SGST or IGST will be depend upon the location of supplier and the PLACE OF SUPPLY. To determine the place of supply there are comprehensive provisions in the Act. Like for example and relevant for the current issue, the place of supply of services related to immovable property like construction service, architect consultancy, lodging and stay, renting etc. will be the location of property itself.

Now consider a situation where an owner of a firm registered under GST in the State of Uttar-Pradesh travels to Mumbai (Maharashtra) for his business purposes. He stays in a hotel in Mumbai during his business trip. The hotel will charge him CGST and Maharastra GST. Now the question arises whether the person will be eligible to take credits of this service even if he provides the GSTIN of his firm.

The opinions of Consultants are divided on this matter. One category are of the opinion that no credits shall be available on this transactions and to avail the credits the person will have to get registered in Maharashtra. The second category is of the opinion that the person will be able to avail the CGST portion as that has applicability to all over India.

This issue might not hit hard on businesses in general as number of transactions might be less but it will certainly be a problem for people who are engaged in related business like travel agents booking hotels on behalf of customers. A Writ Petition (W. P. (C) 7320/2017) has also been submitted to Delhi High Court citing this issue in the case of D. Pauls Travel & Tours Ltd. Versus Union of India & Another [ 2017 (12) TMI 640 - DELHI HIGH COURT ] however the final decision is yet to come. The Honorable Court suggested that this issue must be taken by the GST Council and suitable clarifications should be issued. Clarification on this issue is still pending.

The suggestions and opinions of readers are most welcomed. Thank You.