QUESTION

1. My client is in the business of Transportation i.e. GTA. 2. Till now, he is not charging GST on the invoices. His customer made payment in RCM basis @5%. 3. My client has purchased Lorries during the F.Y. 2018-2019 and 2019-2020 and want to claim the ITC. 4. For claiming ITC he is ready to charge his customers @ 12% on direct charge basis. Q.1 Can he Claim the ITC on the Lorries purchased in :- A. F.Y. 2018-2019 B. F.Y. 2019-2020 If yes, Please suggest the procedure. Q2. From which date he can start billing under direct charge system.

ANSWER

Facts of the case:GTA is providing services on RCM basis and is not paying any output tax. GTA purchased lorries in FY 2018-19 and 2019-20.

Law Applicable:

(i) Entry no. 1 of Notification 13/2017 of CGST enlists GTA as a service on which tax shall be payable on reverse charge basis if the rate of tax opted is 2.5%+2.5%, i.e 5%.

(ii) Entry no. 9(iii) of Notification 11/2017 CGST dictates that 2.5% CGST (and 2.5% SGST) shall be levied "Provided that credit of input tax charged on goods and services used in supplying the service has not been taken".

Interpretation: If GTA is paying tax on reverse charge basis then by the combined reading of above mentioned notifications, it is evident that ITC cannot be claimed by GTA.

Further, if GTA wants to claim ITC then he needs to switch to forward charge mechanism and pay tax @ 12% on outward supply.

However please be noted that ITC can be claimed only after exercising option to pay tax @ 12% i.e. from the date of switching to forward charge from reverse charge.

In your case lorries are purchased during the time when you are providing service under RCM, therefore ITC cannot be claimed.

Conclusion: 1. ITC cannot be claimed for purchase of lorry during FY 2018-19 or FY 2019-20.

2. You can start billing under forward charge mechanism from the date of switching and henceforth, be liable to pay central tax @ 6% on all the services of GTA supplied by you .(Reply dt. 6/2/2020)