9911796707
TMI Blog2019 (8) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tamil Nadu State Authority for Advance ruling on the application for advance ruling filed by the appellant. 2. The Appellant has stated that they intend to enter into an arrangement with M/s. C2FO INDIA LLP( hereinafter referred as C2FO), a subsidiary of Pollen Inc, having its Indian Office at, 303, OIA House, 470, Cardinal Gracious Road, Andheri (East), Mumbai - 400099, Maharashtra, India for setting up an interactive automated data exchange which can be installed for data interaction relating to sale & purchase of goods and services between a buyer (the Appellant) and a supplier (any supplier of goods or input services of the appellant) in compliance to various ethical, accounting and business standards. Both the supplier and recipient of goods or services should register on the platform provided by C2FO. The goods and /or services are delivered and the invoice is booked in ERP and marked as approved to pay. The transactions are explained as follows: * Based on the defined schedule, C2FO outbound program will extract approved open invoices (remaining unpaid) and Supplier (vendor) data from SAP and transfer the data to C2FO cloud on AWS (Amazon Web Services). * Data is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue mentioned in the invoice. The value to be adopted for payment of tax is not in dispute in the present case. The issue taken up with the AAR related to the eligibility to the ITC as a result of such discounts. * The Impugned Ruling proceeds on a wholly erroneous interpretation of Section 16 of the CGST Act /TNGST Act and ignores the following fundamental aspects: * Under the CGST/TNGST Act, there exists a difference between commercial price agreed between parties and the value of taxable supply for the purpose of GST; * In the transaction under consideration, the full commercial price is paid by them to the supplier; * The plain language of the proviso to Section 16 of the CGST Act /TNGST Act only requires that 'the amount towards the value of supply along with tax payable thereon be paid within 180 days'. This only means that the (i) full commercial price should be paid to the supplier, and that (ii) the GST should be paid on the value of supply as determined under the CGST ACT / SGST ACT. This is clear as the expression used is 'amount towards the value of supply'. Also what is required to be paid commercially, under the provisions of the contract between parties as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial price is paid within 180 days and GST is paid on the value determined under GST law including on the discount component not permitted as a deduction from value under Section 15 of the CGST Act, tantamount to reading in additional condition into the Proviso, which is impermissible in law. It is well settled law that no additional provisions can be read into a statutory provision when there exists none. * The price to be paid for supply of goods/ services is a matter of commercial arrangement between parties. Section 9 of the Sale of Goods Act, 1930 makes it clear that the price in a contract of sale of goods is to be fixed or agreed between parties. Therefore, when there is no dispute between parties that the price for the supply of goods/ services has been paid in full, and, GST as appropriate has also been paid on the value of goods in terms of Section 15 of the CGST/TNGST Act, then the second proviso to Section 16 of the CGST Act/TNGST Act has no applicability. * A careful perusal of Section 16(1) indicates that the registered person shall be entitled to take credit of input tax charges on any supply of goods or services which are used in the course or furtherance of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch need not be the entire value of supply. As per the mutual agreement, if such value of supply is reduced, like in the present case, such payment fulfils the requirement, "amount towards the value of supply" Hence, the payment in the present case has to be construed as in full compliance to the Proviso to Section 16. Accordingly the proportionate input tax credit cannot be denied. For the reasons stated in the Statement of Facts, the post-purchase discount extended by the supplier is not an allowable deduction under Section 15(3) since the requirements of the said provisions are not satisfied. Hence, GST is payable by the Supplier on the entire price of the goods. Once the entire price is treated as transaction value for the purpose of Section 15, such value should be treated as being paid even for the purpose of section 16(1) Proviso 2. This is for the reason that the term 'the value of supply' in Proviso 2 to Section 16 has to be read in harmony with the same term mentioned in Section 15. Therefore the payment made by the company has to be construed as proper payment in compliance with Section 16(2) of the Act though there is an actual lower payment by them to the Supplier of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for the entire undiscounted GST paid by the Supplier while the original Authority has ruled that the Appellant will be eligible only to the credit proportionate to the amount of value paid by them (i.e. the discounted price), even though the Appellant has stated to pay the entire GST raised in the Invoice (i.e., tax on the undiscounted price). The Appellant has relied on Circulars issued by CBIC in the regime of Central Excise and Service Tax and decisions of Judicial Fora and have claimed that in as much as there is a post-invoice reduction in price, they are still eligible for the credit of entire Tax paid by the Supplier. 8. The statutory provisions of section 16 of the Act relied upon by the AAR in support of their decision is reproduced below: Section 16 of CGST Act 16. (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the output tax liability. The appellant interprets the words, 'amount towards the value of supply' to be the commercial price, which is mutually agreed upon between the supplier and the buyer (appellant) and claims that the said proviso does not have any application to the case at hand. Further, they have stated that the legislative intention is to merely ensure that suppliers especially those in the MSME sector are paid the commercially agreed price on time, for which reliance is placed on the discussions and decisions of the 29th GST Council meeting as relevant to Section 16 of the CGST Act. 9. We find that Hon'ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company [2018 (361) E.L.T. 577 (S.C.)] = 2018 (7) TMI 1826 - SUPREME COURT, has spelt out in detail as to how to Interpret the Statute, wherein in Para 26 has stated as under: ................In the later decision, a Bench of seven-Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute : "(i) In interpreting a taxing statute, equitable considerations are entirely out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. Section 9 makes it clear that GST shall be levied on the value as determined under Section 15 of the Act. Section 15(1) states that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply to unrelated recipients. Section 15(3) is critical in determining the value of goods where discounts are involved. As per the subsection the value of the supply shall not include any discount which is given, before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply and in case the discount is given after the supply has been effected, if such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and further the input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. It is observed that none of these conditions are satisfied i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. Circular No. 122/3/2010 dated 30.04.2010 issued by CBEC in the context of Rule 4(7) of the CENVAT Credit Rules 2004 in respect of Services, states as follows: (b) In the cases where the receiver of service reduces the amount mentioned in the invoice/ bill/ challan and makes discounted payment, then it should be taken as final payment towards the provision of service. The mere fact that finally settled amount is less than the amount shown in the invoice does not alter the fact that service charges have been paid and thus the service receiver is entitled to take credit provided he has also paid the amount of service tax, (whether proportionately reduced or the original amount) to the service provider. The invoice would in fact stand amended to that extent. The credit taken would be equivalent to the amount that is paid as service tax. However, in case of subsequent refund or extra payment of service tax, the credit would also be altered accordingly. and Circular No.877/ 15/2008-Cx dated 17th November 2008, regarding reversal of CENVAT Credit in case of trade discount, is as under: Representations have been received from trade and industry seeking clarification on the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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