2024 (7) TMI 1342 - AAR - GST

Maintainability of Advance Ruling application - Reversal of input tax credit to the extent of tax element in credit note - no agreement between applicant and original supplier saying that the credit notes should not be treated as financial/ commercial credit notes - no agreement between the applicant and the supplier to have the ITC claim reduced - mismatch of ITC claim figures between GSTR-3B and GSTR-2A figures - impact of incorrect claim of output tax liability reduction based on a financial/ commercial credit note issued by him to applicant. Whether the questions on which advance ruling is sought are admissible as per the provisions of the CGST Act, 2017 governing advance ruling Sec. 97 of the CGST / SGST Act specifies about the application for advance ruling? - HELD THAT - The questions regarding Liability to reverse input tax credit (ITC) based on credit notes and Eligibility to claim ITC based on original supply invoices, falls within the purview of clause (d) of sub-section (2) of Section 97 of the CGST Act, 2017; i.e, admissibility of input tax credit of tax paid or deemed to have been paid . The question on Rejection of ITC claims due to mismatch between GSTR-3B and GSTR-2A and Impact of supplier's incorrect output tax liability reduction on applicant's ITC claim, are not in respect of any matter that IS specified in Sect. 97 (2) of the CGST Act. This authority being a creature of statute has to function within the limits of the jurisdiction conferred on it. Accordingly, the jurisdiction of this authority does not extend to Issue rulings on these questions. It is seen that in the instant case it is apparent that the original supplier has issued credit notes with tax elements and reduced their output tax liability, resulted in mismatching of the input Lax credit available in GSTR 2A of the applicant and the ITC availed in GSTR-3B. The applicant has not furnished adequate reasons for the said mismatch; instead they have filed an application for advance ruling to the competent authority and also submitted their readiness to reply to the proceedings on the receipt of advance ruling. The GSTR 2A of the applicant shows that the supplier had issued credit notes in the form of reducing selling price through Invoices and it is seen that the credit notes issued by the supplier to the applicant are not commercial ones - Further, the Jurisdictional Officer has reported that the applicant has been served with a notice GST ASMT-10 dated 09.07.2020 under Section 61 of the CGST/SGST Act 2017 to the applicant for the discrepancies noticed in the scrutiny as per the scrutiny task parameters. The advance ruling application has been filed by the applicant on 19.08.2021. On a combined reading of the provisions governing advance ruling under Sect, 97 98 of the CGST Act it is evident that the authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of the CGST/SGST Act - Therefore, it is apparent that, proceedings are pending against the applicant on the date of filing of advance ruling online application on 19.08.2021 and liable to be rejected under first proviso to Section 98 (2) of the Act.

Issues Involved:
1. Liability to reverse input tax credit (ITC) based on credit notes.
2. Eligibility to claim ITC based on original supply invoices.
3. Rejection of ITC claims due to mismatch between GSTR-3B and GSTR-2A.
4. Impact of supplier's incorrect output tax liability reduction on applicant's ITC claim.

Detailed Analysis:

Issue 1: Liability to Reverse Input Tax Credit Based on Credit Notes
The applicant, a distributor of consumer products, received post-supply discounts from the supplier (HUL) through credit notes, which the applicant treated as financial/commercial credit notes without acknowledging any tax element. The applicant sought clarity on whether they would be liable to reverse ITC to the extent of the tax element in such credit notes if there was no agreement stating otherwise. The ruling stated that since the question is already pending in proceedings, it is rejected under Section 98(2) of the CGST Act.

Issue 2: Eligibility to Claim ITC Based on Original Supply Invoices
The applicant claimed ITC based on the original supply invoices and paid output tax after deducting the eligible ITC. The applicant questioned whether they could claim ITC as per the purchase invoices shown in GSTR-3B, given that there was no agreement with the supplier to reduce the ITC claim. The ruling reiterated that the query is pending in proceedings and thus rejected under Section 98(2) of the CGST Act.

Issue 3: Rejection of ITC Claims Due to Mismatch Between GSTR-3B and GSTR-2A
The applicant faced discrepancies between ITC claimed in GSTR-3B and GSTR-2A due to the supplier's incorrect treatment of credit notes. The applicant argued that Section 43(5) should be invoked, which addresses mismatches due to non-declaration of credit notes by the recipient or excess reduction in the supplier's output tax liability. The ruling stated that questions 3 and 4 do not fall within the matters specified under Section 97(2) of the CGST Act, and hence, the authority has no jurisdiction to issue a ruling on these questions.

Issue 4: Impact of Supplier's Incorrect Output Tax Liability Reduction on Applicant's ITC Claim
The applicant contended that the supplier's incorrect reduction of output tax liability based on financial/commercial credit notes led to a mismatch in ITC claims. The applicant sought clarity on whether such actions by the supplier would affect their ITC claim. The ruling confirmed that the authority lacks jurisdiction to issue a ruling on this matter as it is not specified under Section 97(2) of the CGST Act.

Conclusion:
The application for advance ruling was primarily rejected due to ongoing proceedings related to the issues raised. The authority emphasized that it cannot admit applications where questions are already pending or decided in any proceedings under the CGST/SGST Act. The ruling highlights the importance of ensuring no active proceedings are underway before seeking an advance ruling on tax matters.

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