The Indirect Taxes Committee of the Institute of Chartered Accountants of India (ICAI) has come with the useful publication titled, “Practical FAQs on Input Tax Credit”.
The publication while clarifying on eligibility and Conditions for taking ITC stated that Section 16(1) brings out the main requirement of any tax being eligible as ITC, which is ‘it must be used or intended to be used in the course or furtherance of his business’. As long as this condition is satisfied along with other conditions in section 16, ITC is eligible for the company. The fact that these procurements are out of a grant received from outside India does not affect the ITC’s eligibility.
The IRP portal decides the applicability of e-invoicing of a supplier based on the turnover as per the GST network in any preceding financial year from 2017-18 onwards. It may so happen that the particular supplier would have crossed the threshold exemption limit for e-invoicing in the current year and hence, the invoicing portal would have enabled the e-invoicing for the supplier. However, if the supplier has already crossed the threshold and has become a qualified person to issue the e-invoice, it becomes mandatory for him to issue the e-invoice. If e-invoice is not issued, then as per rule 48(5), the said invoice shall be an invalid invoice. Therefore, if the recipient wants to claim ITC, he should have a valid invoice which is e-invoice with a valid IRN [as per section 16(2)(a)].
The ICAI while addressing the issue that whether in the absence of e-way bill for any inputs, the credit of the same can be denied in case of refund or GST Audit said that Section 16(2)(b) of the CGST Act, 2017 provides every registered person who has received the goods &/ or services shall be allowed to claim credit of input tax provided he has complied with the other conditions of section 16. While examining the eligibility of ITC to a registered person, one may check whether the taxpayer has actually received the goods to be eligible for the credit as per the condition laid down in section 16(2)(b). The easiest way to verify the receipt is to check the e-way bill against the invoices issued as the e-way bill is generate for the movement for the goods from the premises of the supplier to the premises of the recipient. It may be contended that ITC is restricted in cases where the taxpayer is unable to provide the officer with the physical copy of the e-way bill including in cases such as “bill-to-ship-to” transactions.
However, the deeming provision has been created in the Act by way of insertion of an explanation to section 16(2)(b) wherein the receipt of goods by ship-to party will also be considered as receipt of goods by bill-to party thus making them eligible for credit. There cannot be a denial of ITC to a taxpayer who does not have physical possession of the e-way bill if he is otherwise able to prove the receipt of goods.
The Indian company is not eligible for claiming ITC on IGST paid on import of the engine as the Indian company is not the user of the engine and is neither the supplier of the said engine to the customer. Since, ITC can be availed on goods or services used or intended to be used in the course or furtherance of business as per section 16(1), no ITC can be availed on the IGST paid by the Indian company as the said engine is not being used by the said Indian company. Also, since the Indian company is not acting as trader in the given example, the ITC of motor vehicles engine cannot be availed by the Indian company.
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