Goods and Services Tax – GST – By: – Pradeep Jain – Dated:- 12-12-2017 Last Replied Date:- 13-12-2017 – In normal parlance, there are cases where the service recipient retains a certain portion of payments to be made to the service provider. The amount so retained is paid to the service provider only after the provision of service is complete. This update seeks to take an insight into various provisions for ascertaining whether the credit will be allowed of the GST portion pertaining to the said retention money. Before Point of Taxation Rules, 2011 were introduced, service tax was payable on receipt basis. Therefore, cenvat credit of the service tax paid was allowed upon partial payment along with service tax, on the basis of invoice raise
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money. One school of thoughts is of opinion that the entire credit will be disallowed even if some amount of bill is not paid while other school of thoughts claim that only proportionate credit will be disallowed as pertaining to the amount not paid. While there are some experts who are of the view that the entire credit will be allowed even if some part of the bill is not paid to the supplier. In this regard, the admissibility of ITC is determined by section 16 of CGST Act, 2017. Second proviso to section 16(2) reads as follows:- Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply a
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be allowed even if some portion of bill is retained as the amount of GST is totally paid and the supplier has also paid the GST to the government exchequer when the invoice was raised. However, if this view is considered, the very basic purpose of this proviso will be defeated as the GST will be paid in every case. It is worthwhile to mention here that the return cannot be filed unless the tax is paid. Therefore, if this contention is accepted, there was no need of drafting this proviso at all. Therefore, in our view, the interpretation that only the proportionate credit should be reversed seems justified; all the other interpretations does not commensurate with the intention of the law makers. The content of this GST update is for educatio
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