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ITC can be claimed on inward supplies by the recipient when consideration is paid through book adjustment

May 9, 2019[2019] 105 taxmann.com 143 (AAR - WEST BENGAL)
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GST : Applicant can pay consideration for inward supplies by way of setting off book debt

Facts

• Applicant engaged in manufacturing and retailing of jewellery and articles made of gold, silver, platinum, diamonds and other precious stones, apart from his own retail stores, also maintains a network of franchisee-operated stores. He grants such a franchisee the right and license to operate a showroom and to use, in connection therewith, certain Proprietary Marks and System in accordance with a Franchise Agreement (Agreement). The applicant raises tax invoices on the Franchisee for supply of jewellery and other articles and also for Franchise Support Services in terms of Agreement periodically. On its part, Franchisee also raises tax invoices on applicant for supply of old gold, silver etc., received from customers. The applicant intends to settle the mutual debts through book adjustments. He seeks an advance ruling on whether input tax credit is admissible when he settles through book adjustment, debt created on inward supplies from Franchisee.

Held

• Unless law specifically restricts recipient from claiming input tax credit when consideration is paid through book adjustment, credit of input tax cannot be denied on this ground alone.

• Thus, applicant can pay consideration for inward supplies by way of setting off book debt. The GST Act and rules made there under do not restrict recipient from claiming input tax credit when consideration is paid through book adjustment, subject to conditions and restrictions as may be prescribed and in manner specified in sections 16 and 49 of the CGST Act, 2017.

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