Purchaser not entitled to ITC if seller has paid GST but preceding seller has not discharged its liability: AAR

The Punjab Authority of Advance Ruling(AAR Punjab) in the matter of M/s VIMAL ALLOYS PVT. LTD. has ruled out that Purchaser not entitled to ITC on purchases made by it from the seller who had discharged its GST liability but preceding seller has not discharged its liability.

The assessee is running a furnace at Mandi Gobindgarh and for the purpose of the same, the assessee is procuring ferrous alloys, scrap, gas and other materials from within the State of Punjab.

That the assessee is receiving the material against GST Invoice on which it is entitled to claim Input Tax Credit on the tax paid on the purchases made by it. The assessee is making the payments through banking channels and all the transactions are being reflected in its books of accounts.

The Question and Ruling as follows:

The present application has been filed under Section 97 of the Central Goods and Service Tax, 2017 and the Punjab Goods and Service Tax Act, 2017 (hereinafter referred to as “the CGST Act and PGST Act”) by M/s VIMAL ALLOYS PVT. LTD., GSTIN: 03AAACV7801M1ZB, Shop No. 445, Sector 3-C, G.T. Road, Mandi Gobindgarh-147301, the applicant, seeking Advance an advance Ruling in respect of the following questions:

1. Whether the purchaser is entitled to claim Input Tax Credit on the purchases made by it from the seller who had discharged its tax liability but the preceding seller has not discharged its liability under the Act?

2. If answer to the above is in negative, then how the purchaser will ensure that the tax liability has been discharged by all the sellers falling in the queue of the transaction?

3. Whether the purchaser would be eligible for the ITC since no infrastructure has been provided by the Govt. in order to ensure discharging of tax liability by the sellers falling in the queue of a transaction?

4. Whether the purchaser is entitled to claim Input Tax Credit on the purchases made by it from the seller in the event of non-payment of tax by the seller even though the purchaser is in possession of the invoice, other relevant documents and the payments ha􀀆e been made through banking channels and there is no connivance or collusion between the purchaser and seller?

RULING

1. No. As per provisions of Section 16(2)(c) of CGST Act read with PGST Act, the purchaser is not entitled to claim Input Tax Credit on the purchases made by it from the seller who had discharged its tax liability but the preceding seller has not discharged its liability under the Act.

2. Question no. 2,3 and 4 above are not covered under the purview of Section 97(2)(d) of CGST Act and PGST Act, hence no ruling could be passed on these questions.

For Official Ruling Download PDF Given Below: