Full Credit Available On GST Charge In The Tax Invoice Issued By The Supplier: AAR

The Andhra Pradesh Authority of Advance Ruling (AAR) has ruled that full credit of the GST charge is included in the tax invoice issued by the supplier even if later commercial or financial credit notes are issued.

The bench of K. Ravi Sankar and R. V. Pradhamesh Bhanu has observed that there is no requirement for the applicant to reverse the ITC proportionately to the extent of the financial or commercial credit note issued by the supplier.

The applicant is in the business of supplying various electronic Items. The applicant purchases various electronic Items from a supplier. The supplier issued a Tax Invoice and charged GST on the taxable value. The applicant submits that supplier paid GST, filed GSTR 3B, and reported details of supplies in GSTR 1. The applicant has received the goods and made the payment of consideration as per the tax invoice for the goods received from the supplier.

The applicant sought an advance ruling on the issue of whether the applicant is duly eligible to take full credit of the GST Charge in the tax invoice issued by the supplier and whether GST was paid by the supplier to the government even though a later commercial or financial credit note is issued for part of the invoice.

Yet another issue raised was whether the applicant is required to reverse the ITC proportionately to the extent of the financial or commercial credit note issued by the supplier.

The AAR noted that the financial credit note shall not be used as a conduit to transfer input tax credit fraudulently by raising an invoice for a higher value to transfer ITC and then reducing the transaction value through the financial credit note, whereas the ITC transferred Is left unaltered. In case such a misusage of a financial credit note Is noticed at any point, the same shall be liable for penalties under Section 132(b).

The AAR held that the value of supply shall not include any discount by way of the issuance of credit note(s) except in cases where the provisions contained in clause (b) of subsection (3) of Section 15 are satisfied.

Applicant’s Name: M/s. Vedmutha Electricals India Private Limited

Date: 26-05-2023

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