The Chennai Authority for Advance Ruling (AAR) ruled that Goods and Services Tax (GST) Input Tax Credit (ITC) on Contract Services can be availed by Information Technology (IT) and Information Technology Enabled Services (ITeS) Suppliers for Healthcare Sector.
The Applicant, M/s Access Healthcare Services Private Limited, Kochar Technology Park, Chennai is registered under the GST Act. The applicant is incorporated under the Indian Companies Act having its registered office at Chennai, Tamil Nadu engaged in the business providing Information Technology (IT) and Information Technology Enabled Services (ITeS) for the health sector. The company offers business process outsourcing, application services, and robotic process automation tools to healthcare providers, payers, and related services providers.
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The applicant being in the service sector, particularly in IT space, human resource (HR) form the backbone of applicants activities. So technically qualified resources are a very important key to their operation. Considering the volatile job market, the applicant was finding it extremely difficult to identify, train, recruit and retain sustainable resources. Hence the applicant considered hiring the service of professional contract-staffing firms to avail Human resources.
Such firms, i.e Staffing Firms would tax invoices on the applicant towards the services rendered, along with applicable Goods and Services Tax, which falls under SAC 998513 – Contract Staffing Services, with 18% GST rates. In light of the above facts the applicant is filing the present application before AAR seeking Advance ruling on the question u/s 97(2) of CGST Act, 2017 i.e “admissibility of input tax credit of tax paid or deemed to have been paid”.
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In Interpreting of law the applicant stated that u/s 16 of the CGST,2017 & TNGST Act, input services should be used in the furtherance of the business. The relevant text of Section 16 is;
“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 such person”.
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The applicant stated that in the light of above mentioned provisions, it shall be noticed that in order to avail ITC on any inward supply, ‘ the supply should be used in the course or furtherance of business.’ In support of this certain FAQs was GST published by the CBIC dated 31 March 2017. Relevant question and answer thereto is reproduced below:
“Q 4. Is credit of all input tax charged on supply of goods or services allowed GST?
Ans. A registered person is entitled to take credit of input tax charged on supply of goods or services or both to him which are used or intended to be used in the course or furtherance of business, subject to other conditions and restrictions.”
The applicant further submitted that Section 17(5) of CGST Act & TNGST Act provides the cases where ITC is admissible, the references were also produced which does not block the credit by Section 17(5) of the Act.
Judicial precedents on credit eligibility was also mentioned by the applicant, in the ruling of Coca Cola India Pvt Ltd. [2009] by Bombay HC and Apex Court in Doypack Systems Pvt Ltd [1988], similar provisions were held.
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The AAR Bench comprising Smt.D.Jayapriya,IRS & Smt. A.Valli, observed that as the applicant is engaged in the business of providing IT & ITeS for the healthcare sector.
After all the issues raised by the applicant, the bench find that for the availment of ITC is governed by the provisions of Section 16 & 17 of the CGST Act, 2017 and Section 16 provides for the eligibility and conditions for taking ITC, Section 17 deals with the apportionment of credit and blocked credits.
As per 16(1) of CGST Act, the supply should be for the furtherance of business, the bench agrees the said activities are intended for the furtherance of business, as the service rendered are man power supply received from the supplier.Therefore the conditions u/s 16 is satisfied.
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As the transaction does not fall under the above mentioned categories of Section 17 of the Goods and Services Tax Act, so the availment of ITC on the transaction is not blocked by Section 17(5) of the Central Goods and Services Tax Act, 2017.
On the basis of the nature of the business the applicant is involved in satisfies the Section 16 of the CGST Act, 2017 for the availment of the ITC on contracting staffing services.
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