QUESTION

ABC is having registered Office at Mumbai and obtained GSTIN from Mumbai. Nature of business is rough diamonds purchase, Manufacturing activity (cutting & polishing) done through Labour contractor situated at Gujarat and trading finished goods in Mumbai. ABC has purchase a Machine (useful for mfg. activity) from Surat (Gujarat) and given instruction to deliver and installed at Labour contractor’s factory address. Also mentioned in Invoice and E-way bill as same as above (Buyer: ABC -Mumbai and Ship to: Contractor Name & Gujarat address -Contractor is none GST holder) Question: Whether ABC is eligible to claim (IGST as per invoice) ITC on said machine?

ANSWER

FACTS OF THE CASE:

ABC having registered Office at Mumbai having business of rough diamonds purchase, Manufacturing activity (cutting & polishing) done through Labour contractor situated at Gujarat and trading finished goods in Mumbai. He purchased a Machine (useful for mfg. activity) from Surat (Gujarat) and given instruction to deliver and install at Labour contractor’s factory address. Also mentioned in Invoice and E-way bill (Buyer: ABC -Mumbai and Ship to: Contractor Name & Gujarat address -Contractor is none GST holder). Whether ABC can claim credit on the same?

LAW APPLICABLE:

Section 16 of IGST 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.

Section 143 of CGST Act
(1) A registered person (hereafter in this section referred to as the 'principal') may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job-work and from there subsequently send to another job worker and likewise, and shall,''

a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;
b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

INTERPRETATION:
As per the explanation in Section 16(2)(b), it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person.
Therefore in view of above Explanation, ABC would be eligible to take credit of the invoice raised by Supplier (Gujarat), even though the goods have not been “physically” delivered to ABC as it shall be deemed that ABC has received the goods.

However, Credit of CGST SGST will not be allowed if charged for installation etc (in Gujarat) because the client is located in Mumbai.

Further as per section 143 i.e. Job work procedure, ABC is required to bring back the machine within 3 years from the relevant date subject to extension if applied.

CONCLUSION:
ABC is entitled to take ITC of IGST on the machine directly delivered to contractors place. (Reply dt. 11/10/2021)