Confusion still pertaining in GST

Confusion still pertaining in GST

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Confusion still pertaining in GST

Goods and Service Tax is maturing day by day. After 1st of July 2018 a number of changes, tweets, amendments and clarifications have come in this indirect taxation regime. But the question is has this Law become perfect? The answer is no. Confusion is still pertaining in this one nation one tax regime. Different professionals have different schools of thoughts for a common question. One such biggest confusion is discussed in the below article.

Let us take an example:

Say there is one Ms. Neha who is indulged in business of Home Decor. She visits different states to choose the product. She herself brings the goods to the principal place of business that is in Maharashtra.

As per law of place of supply (POS), in case of goods POS shall be the place where delivery terminates. In case on Ms. Neha the delivery terminates at the location of supplier itself. Therefore supplier of the Goods charges CGST and SGST in the bills given to Ms Neha treating them to be intra-state transactions (as Location of Supplier and Place of supply is in same state/ Union Territory).

The question is, whether Ms. Neha is eligible to take the credit of CGST and SGST paid by her at Delhi (or any other state for that matter) for the purpose of business in Maharashtra?

There are two schools of thought for this problem.

  1. No, Input tax credit cannot be claimed. The reason is that the amount of SGST is paid to Delhi Government while the credit is taken against the output tax liability of Maharashtra SGST. Since the credit of SGST cannot be taken the credit of CGST shall also be not allowed. This creates difficulties for businessman. The only reason that Government is not able to share revenue and therefore the credit shall not be available is just unfair.
  2. The second opinion is that the credit shall be available. The reason being that there is no mention in law regarding that the credit shall not be allowed. The law says credit of CGST can be used for output CGST and credit of SGST can be used for output SGST. They have not allowed the cross utilization of SGST and CGST.

If the Government does not allow the credits of CGST/ SGST paid in one state with the liability of SGST/ CGST of other state how can it call the regime to be “ONE NATION ONE TAX”? Also if Government wants that no credit shall be allowed it shall change the Place of Supply rules that shall be based on invoice.

The other option that may be available with the recipient of Goods is it shall register itself in the state from where the Goods are purchased as a deemed distinct person or ask the supplier to terminate the delivery at the principal place of business.

Awaiting more clarifications from Government in this regard.

Thank You


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