The Orissa High Court, in a recent ruling, held that claim of ITC by an input service distributor (ISD) only in the case of an inward supply, and an ITC transfer from one state to another is not an inward supply.
A division bench of Justice Jaswant Singh and Justice M.S. Raman was considering a petition by the assessee, JSW Steel, a public limited company engaged in the business of manufacturing and selling hot and cold rolled coils and sheets, galvanized coils and sheets, and plates. The assessee has been allotted GSTIN in the State of Odisha and GSTIN in the State of Maharashtra.
The scrutiny of returns filed for the tax periods in question revealed that JSW Steel (Odisha) has paid SGST and CGST under the reverse charge mechanism on bid premium, royalty, DMF, NMET, NPV, etc. The order showed that having utilised a portion of the tax paid on RCM, the petitioner-company in Odisha has passed on to JSW Steel in Maharashtra. JSW Steel in Maharashtra was declared as ISD in the shape of IGST in the garb of outward supply of facilitation services to JSW Steel (ISD).
As per the definition of “Input Service Distributor” contained in Section 2(61), it is necessary that the ISD as an office is required to receive tax invoices towards inward supply.
“Since no such supply being shown to have been made by JSW Steel Ltd. of Odisha to JSW Steel Ltd. of Maharashtra, no prima facie case is made out by the Petitioner. Thus transactions in question prima facie amount to siphoning of tax amounts, therefore, apparently warrant invocation of proceeding under Section 74 of the OGST/CGST Act.” The Court said.
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