QUESTION

I am doing the audit under section 35 of GST Act. My client has GSTIN in branches and H.O. There is query that my client taken input in his one of the branch at Delhi. Every documents are in the name of Delhi branch and same input is being reflected in 2A and have been duly accounted for in 3B returns. But while finalizing accounts , client charged/booked the expenses on which input taken , in the books of other branch not in Delhi branch. now i have to report in 9c.
My query are as follows:
1. Is there any problem if expenses are booked in another branch, while input is eligible and taken in other branch.
2. What should be my disclosure as an auditor. An early response will be highly appreciable.

ANSWER

Facts of the case: A person is having GSTIN in branches and H.O. He has taken input in his one of the branch at Delhi. All documents are in the name of Delhi branch and same input is being reflected in 2A and has been duly accounted for in 3B returns. But while finalizing accounts, he charged/booked the expenses on which input taken, in the books of other branch (say Mumbai).
Is there any problem if expenses are booked in another branch, while input is eligible and taken in other branch.

Law Applicable: Section 16 of CGST Act

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,''

a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

b) he has received the goods or services or both.

Explanation.' For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services''

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person.

c) 'subject to the provisions of section 41,the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and

d) he has furnished the return under section 39

Interpretation: Booking of expenses in accounts of another branch while taking credit in other is a matter of Income Tax. But since all the branches are consolidated at the time of Balance Sheet, so it will not raise any problem in Income Tax also unless some area-based benefit is availed.

However in GST, ITC is available if all the conditions given in section 16 sub section (2) are fulfilled as reproduced above.

Conclusion: If all the conditions given in section 16(2) are fulfilled, then it is OK as per GST Act and rules. Since documents are already in favour of Delhi Branch which shows possession of documents by Delhi.
(Reply dt. 04/02/2021)