ITC not available on cranes given on hire from H.O. to branch where payments are netted off against receivables

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ITC not available on cranes given on hire from H.O. to branch where payments are netted off against receivables

Sanghvi Movers Ltd., In re – [2019] 108 taxmann.com 70 (AAR – TAMILNADU)
The applicant is providing cranes on lease or hire to clients without transferring the right to use cranes. The head office (H.O.) of the applicant in Maharashtra owns the cranes which are provided to Chennai’s branch office, i.e., the applicant, on monthly rental basis which are further given on lease to customers. The applicant has sought an advance ruling to determine the admissibility of ITC on IGST paid by head office on inter-State movement of cranes.
The Authority for Advance Rulings, Tamil Nadu observed that head office and applicant have obtained separate GST registrations and, hence, they are to be treated as distinct persons under GST. On the basis of documents submitted by the applicant, H.O. raises tax invoice on it for the cranes provided on hire/rental basis whereas the ownership of cranes remains with H.O. However, it is not paying full consideration for this transaction to H.O. but the same is being netted of against receivables in the books of account of the applicant which is considered as deemed payment.
As per the provisions of the CGST Act, 2017, the applicant will not be eligible for full ITC as it is not paying full amount to H.O. as the payments are netted off against receivables. Therefore, the applicant is not eligible for full ITC on cranes received from H.O. and required to reverse ITC if already taken.

The Authority for Advance Rulings, Tamil Nadu ruled that ITC is not available on cranes given on hire from H.O. to applicant where payments are netted off against receivables.

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