The Supreme Court in in Union of India v. Mohit Minerals, has held that the foreign exporter cannot claim input tax credit (ITC) in India as per the provisions of section 12 of the Integrated GST Act, 2017.
The respondent-assessee have argued that the possibility of two different recipients of services would create absurdities since whether a supply of service is an inter-state supply under Section 7(3) or intra-state supply under Section 8(2) of IGST Act depends on the location of the supplier and the place of supply, which in most cases is the location of the recipient of service. The respondents further argued that since there can effectively be two recipients on a reading of Section 2(93)(a) and (c) of the CGST Act, the transaction may simultaneously become an inter-state or intra-state supply. This could also mean that two recipients can claim ITC.
Rejecting the above arguments, a division bench of the Supreme Court comprising Justice Dr Dhananjaya Y Chandrachud, Justice Surya Kant and Justice Vikram Nath observed that this argument is inapplicable to the case at hand since Sections 7(3) and 8(2) of the IGST Act do not conflate the concept of imports.
“Section 8(2) deals with a scenario where the location of the supplier and place of supply are within the same State/Union Territory in India. This is inapplicable to determining imports where the supplier is located outside India. Similarly, Section 7(3) deals with inter-state supply within the territory of India. Further, both these sections are subject to the provisions of Section 12 of the IGST Act where both- the supplier and recipient are located in India. Section 12 of the IGST Act does not create the deeming fiction under Section 13(9) of the IGST Act which is applicable only when the supplier is located outside India. The applicable section in this case would be Section 7(4) of the IGST Act which clearly stipulates that “Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce”. Thus, no absurdity is created by the deeming fiction argued by the Union Government. In no scenario would the foreign exporter be claiming ITC in India,” the Apex Court said.
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