Allowed

TN/AAAR/04/2019(AR) of Mrf Limited

GST AAAR24 Jun 2019TN/AAAR/04/2019(AR)

Case brief

AI extract

What is this about?

Appellant challenged an advance ruling denying full Input Tax Credit due to post-supply discounts. The Appellate Authority held that if the full commercial value including tax is paid, the recipient is entitled to full ITC, setting aside the original ruling.

What did the court decide?

Appellant M/s. MRF Ltd is allowed to avail Input Tax Credit of the full GST charged on the undiscounted supply invoice.

TN/AAAR/04/2019(AR) of Mrf Limited — GST and Indirect Tax | GST AAAR (2019)

¶1

lclnstituted^{under Section 99 of TamilnaduGoods and Services Tax Act} 20171

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A.R.Appeal No.³ /2OI9/AAAR

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Date:24.06.2019

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BEFOR.E THE^{BENCH OF}

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Thiru.M. AJIT^KUMAR,MEMBER

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DT.T.V.SOMANATHAN'^MEMBER

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ORDER-in-Appeal^{No' AAAR lo4 l2OL9 lARl} (Passed by Tamitnadu^{stateAppellate Authority for AdvanceRuling under section} 101(1)oftheTamilnaduGoodsandServicesTaxAct,2ol7| Preamble

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1'IntermsofSectionlo2oftheCentralGoods&ServicesTaxAct 2OlT lTamilnadu^{Goods& services Tax Act 2Ol7("theAct", in Short)' this order} may be amended^{by the Appellateauthorityso as to rectify any error apparent on} the face of^{the ,""ord, if such error is noticedby the Appellateauthority on its own} accord, or is^{brought to its noticeby the concerned officer, the jurisdictionalofficer} or the applicant^{within a periodof six months from the date of the Order'Provided} that no rectification^{which has the effect of enhancing the tax liability or reducing} the amount^{of admissible input tax credit shallbe made,unless the appellant has} been given an opportunity^{of being heard'}

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Under Section^{103(1) of the Act, this Advanceruling pronounced by the} Appellate Authority^{under chapter XVII of the Act shall be bindingonly}

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(a). on the applicant^{who hadsoughtit in respect of any matterreferredto in sub-} section⁽²⁾ of^{Secti on 97 for advanceruling;}

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(b). on the concerned^{officeror the jurisdictionalofficer in respect of the applicant'}

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Under section^{103 (2) of the Act, this advancerulingshall be binding unless the} law, facts or^{circumstances supporting the said advanceruling have changed'}

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Under Section^{104(1) of the Act, where the AppellateAuthorityfinds that} advance ruling^{pronouncedby it under sub-section (1) of section 101 has been} obtainedbytheappellantbyfraudorsuppressionofmaterialfactsor misrepresentation^{of facts, it may, by order, declaresuch rulingto be void ab-initio} and thereupon^{all the provisionsof this Act or the rules made thereunder shall} apply to the^appella

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ffiftheaPPellant	MRFLimited Old No.^124,New Thousand^Lights' No. 114,^GreamsRoad, Chennai-⁶⁰⁰⁰⁰⁶
CSflX^{or User ID}	SAuovqgl\aa^IS4G
eauancenuting^Orderagainst whichaPPeal^isfiled	Otd"t N".^SlAAR
Dateoffiling^aPPeal	29.O3.2079
Reoresented^bY	Karthik^Sundaram
ffilc tional^{Autho ritY- c e n t re}	Ctt""".i^{NorthCommissionerate}
Erisdictiond^{AuthoritY-State}	ilrr"nssistant^{commissioner(sr),} Egmore^{A"""19-9t!9it91"'}
Whether^payment-of feesfor^filing appealis^{discharged'IfYes'the} amountand^{challandetails}	I made^vide chaltans^{No.HDFC19033300460413dated} 28.03.2019^& HDFCi9043300023328 datedO3.O4.2OI9

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Attheoutset,wewouldliketomakeitclearthattheprovisionsof boththeCentralGoodsandServiceTaxActandtheTamilNaduGoodsand service^{Tax Act are the same except for certain provisions. Therefore,unless} amentionisspecificallymadetosuchdissimilarprovisions,areferenceto theCentralGoodsandSenriceTaxActwouldalsomeanareferencetothe same provisions^{underthe Tamil Nadu Goods and Service Tax Act'}

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ThesubjectappealisfiledunderSectionl0O(1)oftheTamilnaduGoods& services^{Tax Act 2orr} lcentral^{Goods & services Tax Act 2or7(hereinafter referred} to the Act,)^{by M/s. MRFLimited(hereinafterreferred to as 'MRF' or Appellant')'} TheappellantisregisteredunderGSTvideGSTIN33fuqACM4IS4GTZU.Theappeal isfiledagainsttheorderNo.S/AARl2olgdated22.oI.2olgpassedbytheTamil Nadu State^{Authorityfor Advance rulingon the applicationfor advance ruling filed} by the aPPellant.

¶18

2'TheAppellanthasstatedthattheyintendtoenterintoanarrangementwith M/s.C2F0INDIALLP(hereinafterreferredasC2F0),asubsidiaryofPollenlnc, having its^{Indian office at, 303,0IA House,47o, Cardinal Gracious Road,Andheri}

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(East),Mumbai-4o00gg,Maharashtra,Indiaforsettingupaninteractive automated^{dataexchangewhich can be installedfor data interaction relating to} sale &^{purchase of goodsand servicesbetween a buyer (the Appellant) and a} supplier (any^{supplier of goods or input services of the appellant) in complianceto} various ethical,^{accountingand businessstandards' Both the supplierand} recipient of^{goods or servicesshould register on the platform provided by c2F0' The} goods and, f or^{services are deliveredand the invoiceis booked in ERP and marked} as approved^{to pay. The transactionsare explainedas follows:}

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}Basedonthedefinedschedule,c2Fooutboundprogramwillextract approvedopeninvoices(remainingunpaid)andSupplier(vendor)datafrom sAp and transfer^{the datato c2FOcloud on AWS (Amazon web services)'}

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) Data is first^{loadedto client SFTP(Secured File TransferProtocol) staging} area.AutomatedprocesspicksupdatafromsecureTransferofinvoices Platform^{(SFTP) to C2F0 AWS 53 cloud'}

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F Successfully^{discountedinvoice data is sent} back to client^{SF-IP staging} area.

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Rate) or flat^{discounton the C2F0 platform24x7 '}

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(SRM) on keY^trigger

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C2F0 platform^{alerts Supplier RelationshipManager} with suPPliers^{at the}

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points such^{as supplier activity on the portalto engage} opportune^moment.

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minimum^{APR and}

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) Client Finance^{team provide guidance on desiredAPR'} cash pool.^{C2FOalgorithms will use these settingsto} take a decision^on which invoices^{are awarded for early payment by client'}

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) By accepting^{c2FO',s Termsand conditions, the supplier will be agreeable to} offer certain^{discountin return for an early paymentof an Invoicefrom the} recipient of^{goods or services (i'e'' the appellant)'}

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on the online^{platform c2Fo,where post sale, post supplyand post issue of} invoice depending^{on the earlypayment schedule offered by the supplier' the buyer} (appellant)canacceptdiscountandmakepayment.Thenacommercialcreditnote would be issued.^{The paymentwould be made one time for each invoice at the} discountedpricealongwiththeGsTpaidbytheSupplierontheundiscounted value. They^{state that they do not fall under section15(3) (a) or (b) of GGSTAct'} 2017, hence^{the valueof supply shouldbe full undiscountedvalue' In the light of}

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the above, they wanted to know whether, when GST is paid on full value by supplier and credit note does not include GST, they can take full ITC on undiscounted value.

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The Original Authorities has ruled as follows:

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"As per the Provisions of Section 16 of the CGST Act 2077 /TNGST Act 2oI7, the applicant can avail input tax credit only to the extent of the invoice value raised by the suppliers less the discounts as per C2FO software which is paid by him to the suppliers."

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4' Aggrieved by the above decision, the Appellant has filed the present appeal.

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The grounds of appeal are as follows:

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the discounts are given after the invoices are raised and supply of goods is made' Section 15(3) is not applicable and hence the value of supply in such transactions is the full undiscounted value mentioned in the invoice- The value to be adopted for payment of tax is not in dispute in the present case. The issue taken up with the AAR related to the eligibility to the ITC as a result of such discounrs.

¶39

Section 16 of the CGST Act /TNGST Act and ignores the following fundamental aspects:

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Under the CGST/TNGST Act, there exists a difference between commercial price agreed between parties and the value of taxable supply for the purpose of GST;

¶41

In the transaction under consideration, the full commercial price is paid by them to the supplier;

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The plain language of the proviso to Section 16 of the CGST Act /TNGST Act only requires that the amount towards the value of supply along with tax payable thereon be paid within 1go days,. This only means that the (i) full commercial price should be paid to the supplier, and that (ii) the GST should be paid on the value of supply as determined under the CGST ACT /SGST ACT. This is clear as the expression used is 'amount towards the value of supply'. Also what is required to be paid commercially, under the provisions of the

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contract between parties as^{well as} the^{GST Act is only the agreed} commercial price and not the^{value of taxable supplywhich can be} different from the commercial^{price agreed upon by parties;}

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In the transaction under consideration, full^{commercial price is being} paid by them to the supplier and GST reimbursed^{on the value of} supply for the purposes of GST.^{That beingthe case, the provisions} of Section 16 of the CGST/TNGST^{Act have no applicability,as there} is no failure on their part to pay the commercial^{priceto the supplier}

¶46

The interpretation adopted by the^{AAR is wholly erroneous as it seeks} to categorize persons who have^paid the full^{commercial price to the} supplier and persons who have not^{paid the full commercial price to} the supplier together and deny Input tax^{creditin bothcases, which} is both against the letter as well as the spirit^{of Section16}

¶47

The impugned AAR ruling is wholly contrary^{to the position set out in} clarification of CBEC vide Circular No.^{I22/312O10-S.T. dated30.04.2010} in the context of Rule a]l of the CENVAT^{Credit Rules 2OO4,wherein it is} clarified that 'In the cases where the^{receiver of service reducesthe amount} mentioned in the invoice/bill/challan and^{makesdiscounted payment, then} it should be taken as final payment towards the^{provision of service.'}

¶48

In the case under consideration, there is no^{non-paymentof GST on the} correct taxable value and also no non-payment^{of the commerciallyagreed} upon price by them to the supplier.^{Therefore,in the said fact pattern, the} impugned AAR ruling which seeks to deny^{ITC proportionately is wholly} contrary to the provisions of Section 16 of^{the CGST Act as well as the} scheme of the CGST Act.

¶49

The impugned AAR mling misinterprets^{the expressionthe amounttowards} the value of supply along with tax^{payablethereon' as appearingin the} second proviso to Section 16 of the Act.^{The proviso only requires the} amount contractually/commercially^{agreedupon by the recipient to be paid} to the supplier. The tax alone has to^{be paid on the valuationas per the} CGST AcI/TNGST. The legislative^{intention is to merely ensure that} suppliers especially those in MSME sector^{are paid the commerciallyagreed} price on time, and, deny GST credit if this is^{not done}

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The interpretation taken in^{the impugned AAR ruling that Input tax credit} will be denied in the hands^{on the recipienteven if full commercial price is} paid within 1BO days and GST is^{paid on the value determined under GST} law including on the discount^{componentnot permittedas a deduction from} value under Section 15 of the^{CGST Act, tantamountto readingin additional} condition into the Proviso,^{which is impermissiblein law. It is well settled} law that no additional^{provisions can be read into a statutoryprovision when} there exists none.

¶52

The price to be^paid for^{supplyof goods/servicesis a matter of commercial} arrangement between^{parties.Section 9 of the Sale of GoodsAct,1930} makes it clear that the^{price in a contractof sale of goodsis to be fixed or} agreed between parties.^{Therefore, when thereis no dispute between parties} that the price for the supply^{of goods/serviceshas beenpaid in full, and'} GST as appropriate has also^{beenpaid on the value of goods in terms of} Section 15 of the CGST/TNGST^{Act, then the second provisoto Section 16 of} the CGST AcI/TNGST^{Act has no applicability.}

¶53

A careful perusal of Section^{16(1) indicates that the registeredperson shall} be entitled to take credit of^{input tax charges on any supplyof goods or} services which are used in^{the course orfurtheranceof his business} provided he is in possession of a tax^{invoice or debit note, he has received} the goods or selices, the^{tax charged has been actuallypaid to the} Government and he^{has furnishedthe returnunder Section 39. None of the} conditions/requirements^{are defaultedin the presentcase' Hence,when the} fundamental requirements^{are satisfied,denial of the just input tax credit on} the narrow interpretation of^{the proviso to Section 16 is not maintainable} and deserves to be set aside

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proviso to Section 16 has to be read in harmony with the main^provisionof Section 16 which stipulates^{the conditionsfor entitlement of ITC. The} proviso cannot be read to defeat the^{main purpose of Section 16 which} makes the recipient eligible^{for credit}

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Proviso is applicable to a^{casewherea recipientfails to pay to the supplier} the amount towards the^{value of supply alongwith tax payablethereon'In} their submissions, the^{intentionof the Provisois to exercisecontrol of} genuine supplies which are not^{backedby paymentby the recipientwithin}

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the generally^{accepted terms of paymentperiod from the date of invoice(i'e"} maximum of^{1BO days). This Proviso is inserted in the Law to ensure that} the Purchases^{accounted by recipient are genuine'}

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failure to^{pay the valueand tax to the supplier and not caseswhere value} paid to the supplier^{is reduced as a resultof mutualsettlement between the} supplier and^{the Recipient.The reduced paymentin the caseon hand is not} as a result of^{failure on the part of recipient to pay value and tax to the} supplier. Hence,^{when thereis no failure on their part to pay the value, this} proviso cannot be^{invokedto denythe credit. In all these cases the payment} made after^{deductionof the discount should be treated as paymentin full} and in compliance^{to the requirementsof section16(1)proviso and the} recipient should^{be heldas eligible to take full Input Tax Credit'}

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supplier of^{goodsor services, the amount towards the value of supplyalong} with tax^{payable thereonwithin 180days. The provisodoes not specify that} entire value^{of supply has to be paid.The words 'amount towards the value} ofsupply,impliesonlytheamountasagreedbetweenthesupplierandthe recipient which^{need not be the entire valueof supply. As per the mutual} agreement, if^{such valueof supply is reduced,like in the present case, such} payment fulfils the^{requirement,"amount towardsthe value of supply''} Hence, the^{payment in the present case has to be construedas in full} compliance to^{the Proviso to Section 16. Accordingly the proportionateinput} tax credit cannot^{be denied'}

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For the reasons^{statedin the Statementof Facts, the post-purchase discount} extended by^{the supplier is not an allowabledeductionunderSection15(3) since} the requirements^{of the said provisions are not satisfied.Hence, GST is payable by} the supplier on^{the entire priceof the goods. once the entire priceis treated as} transaction^{value for the purposeof section15, such valueshould be treatedas} being paid^{even for the purpose of section16(1)Proviso 2'This is for the reason} that the term the^{value of supply' in Proviso2 to Section 16 has to be read in} harmony with^{the same term mentionedin Section 15. Therefore the payment} madebythecompanyhastobeconstruedasproperpaymentincompliancewith

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Section 16(2) of the Act though there is an actual lower payment by them to the Supplier of the goods.

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The appellant has prayed to set aside the impugned advance ruling passed by the Authority for Advance Ruling.

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PERSONAL HEARING:

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The Appellant was granted personal hearing as required under law before this Appellate Authority on 3oth May 2OIg. The Authorized representative of the Appellant Shri. S.Karthik, Advocate and s/ shri. Nagaraja- GM-IDT, s.K.patnaik, GM-Taxation and subhajit Das, DGM- Taxation of the Appellant company appeared for hearing' They handed out a compilation of Statutory Provisions , Circulars and Case Laws. The learned representatives reiterated the written submissions submitted along with the Appeal Application filed by them.

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DISCUSSION:

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We have carefully considered the various submissions made by the Appellant and the applicable statutory provisions. The issue before us for determination is whether, the appellant ie M/s MRF, the buyer of the goods and/or services, can avail the ITC of the full GST charged on the undiscounted supply invoice or a proportionate reversal of the same is required to be done by them in case of a post purchase discount given by the supplier to them through the C2FO platform.

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7 ' From the submissions we find that the appellant intends to enter into an arrangement with C2FO for setting up an interactive automated data exchange which can be installed for data interaction relating to sale & purchase of goods and services between a 'buyer (appellant) and a 'supplier' (any supplier of goods or input services of the appellant). By entering into the platform, the supplier will be agreeable to offer certain discount in return for an early payment of an invoice. The quantum of discount offered is not known at the time of supply of goods/ services and therefore a "cash discount not agreed before or at the time of supply,'. It is the contention of the appellant that the taxable value for the purpose of payment of GST will be the value as per purchase contract without considering such discount so offered and the supplier is liable to pay tax on the value before discount. We find that the Appellant is in agreement with this end of the transaction relating to what

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constitutes the^{value on which GST is to be paid. It is further seen that the} discount offered^{through the transactionson the said platform is settled through} commercial^{credit notes only.The pointof contention is that the appellant claimsto} be eligible^{for the entire undiscountedGST paid by the supplierwhilethe original} Authority has^{ruled that the Appellant will be eligible only tothe credit} proportionate to^{the amount of value paid by them (i'e' the discounted price)'even} though the Appellant^{has stated to pay the entire GST raisedin the Invoice(i'e'' tax} on the undiscounted^{price). The Appellant has relied on Circulars issued by CBIC} in the regime^{of central Excise and service Tax and decisions of Judicial Foraand} have claimed that^{in as muchas thereis a post-invoicereductionin price, they are} still eligible^{for the credit of entire Tax paid by the Supplier'}

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g. The statutory^{provisionsof section16 of the Act relied upon by the AARin} support of their^{decisionis reproducedbelow:}

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Section 16 of^{CGST Act}

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76.(1)Euergregisteredpersonshall,subjecttosuchconditionsand be prescribed.^{and in the manner specified in section 49' be} restrictions o" ^og entitted to take^{credit of input tax charged on angsupplyof goodsor seruices} or both to him^{which are usedor intended to be used in the course or} furtherance^{of his businessand the said amount shall be creditedto the} electronic credit^{ledger of such person'}

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(2) Notwitttstanding^{angthingcontainedin this section,no regstered person} shatt be entitled^{to the credit of ang input tax in respectof ang supplgof goods} or seruices or^{both to him unless,-}

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or debit note^{issued bg a suPPlier} (a) he is in possession^{of a tax inuoice} registered und"er^{this Act, or such other} tax paging^{documentsas magbe} prescribed;

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-(b) he has receiued the goods or seruices or both'

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Explanation.-For^{the purposes of this clause, itshall be deemedthatthe} registered^{person has receiued thegood.swhere the goods are deliuered bg the} supplier to a^{recipientor ang otlrcr person on the direction of suchregistered} person'whetheractingasQnagentorotherulise,beforeorduingmouement.ofgoods,eitheragwaaoftransferofdocumentsoftittetogoodsorothenaise; (c)subjecttotheprouisionsofsection4T,thetaxchargedinrespectofsuch supptg has^{been actuallg paid to the Gouernment,either in cash or through} utilization of^{inputtax creditadmissiblein respect of the said supplg; and} (d) trc has furnished^{the return undersection 39:}

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prouid.ed tlnt tuhere the goods against^{an inuoice are receiuedin lots or} instalments,^{the registeredperson shall be entitled to take credit uponreceipt} of the last tot^{or instalment:}

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Provided further that ushere a reciplent faits to pag to the supplier of goods or senices or both, other than the supplies on uthrch tax. is pagable on reaerse charge basis, the amount toutards the ualue of supplg along with tax pagable thereon utithin a pertod. of one hun6red. and eightg dags from the date of issue of inaoice bg the suppher, an amount equal to the lnput tax credlt aaailed bg the recipient shal be added to hls output tax ttabitltg, along ulth lnterest thereon, in such menner as mag be prescribed: (emphasis supplied)

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Prouided also that the recipient shall be entitled. to auail of the credit of input tax on pagment made by him of the amount toward"s the ualue of suppry of goods or seruices or both along with tax pagable thereon. The contention surrounding the appeal at hand is the second proviso to Subsection 2 of Section 16 above. The plain reading of the proviso provides that if a person fails to pay to the supplier of goods, the amount towards the value of supply along with the tax payable within a period of 1BO days from date of invoice, then the ITC taken by him shall be added to the output tax liability. The appellant interprets the words, 'amount towards the value of supply' to be the commercial price, which is mutually agreed upon between the supplier and the buyer (appellant) and claims that the said proviso does not have any application to the case at hand. Further, they have stated that the legislative intention is to merely ensure that suppliers especially those in the MSME sector are paid the commercially agreed price on time, for which reliance is placed on the discussions and decisions of the 29u GST Council meeting as relevant to Section 16 of the CGST Act.

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9' We find that Hon'ble Supreme Court in the case of Commissioner of customs (Import), Mumbai v. Dilip Kumar & company [ 2o1g (361) E.L.T. s7T (S'C')], has spelt out in detail as to how to Interpret the Statute, wherein in para 26 has stated as under:

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'...'..ln^{the later} decision, a Bench of seven-Judges, after citing the above passoge from .Justice G.P. Singh's treatise, summed up the fotlownl principles applicable to the interpretation of a taxing statute ;

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"(, In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the tight of what i.s clearly expressed : it cannot imply anything which is not exprei,tra .l it cannot import provisions in the statute so as to supply any defiiiency . (ii) Before taxing any person, it must be shown that he fatts within thi ambit of the charging section by clear words used in the section,. and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is

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¶86

given to the subject and there is nothing unjust in a taxpayer^{escapingif the} letter of the law fails to catch him on^{account of Legislature's} failure^to express itself clearly^".

¶87

Taking guidance from the Principles set out above, it^{would be fruitful to examine} the provisions of sections 9, 15 and¹⁶ to^{understandthe legal issuesclearly} expressed and whether there is any^{ambiguity.Section16 having being reproduced} earlier, relevant portions of sections 9 and^{15 of the Act are reproducedbelow.}

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Section 9 of CGST Act

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(1) Subject to the prouisions of sub-section^{(2), there shall be leuied a tax} called the central goods and seruices tax on^{all intra-State supplies of goodsor} seruices or both, except on the supplg of^{alcoholicliquor} for^human consumption, on the ualue determined under^{section15 and at such rates,not} exceeding twentg per cent., as maA be notified^{bg the Gouernment on the} recommendations of ttrc Council and collected in^{suchmanner as may be} prescibed and shall be paid bg the taxable^person.

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Section 15 of CGST Act states

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(1) The ualue of a supply of goods or seruices or both shall^{be the transaction} ualue, which is the pice actuallg^{paid or pagable} for^{the said supplyof} goods or seruices or both uLrcre the supplier and the^{recipient of the} supptg are not related and the^price is the^{sole consideration} for^the supplg.

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(2)

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(3) The ualue of the supplg shall not include ang discount^{which is giuen-}

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(a) before or at the time of the supplg if such discount^{has been duly recorded} in the inuoice issued in respect of such^{supplg; and}

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(b) afier the supplg has been effected, if-

¶96

(i) such discount is establistrcd in terms of an agreement^{entered into at or} before the time of such supplg and specifi.callg^{linked to releuant inuoices;and} (ii) input tax credit as is attibutable to the discount on the^{basls of document} issued by the supplier has been reuersed bg^{the recipient of the supply.}

¶97

Section 9 makes it clear that GST shall be^{levied on the value as determinedunder} Section 15 of the Act. Section 15(1) states that the^{value of supply of goods or}

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Servicesorbothshailbethetransactionvalue,whichisthepriceactuallypatoor payableforthesaidsupplytounrelatedrecipients.Sectioni5(3)iscriticalin determiningthevalueofgoodswherediscountsareinvolved.Asperthesubsectionthevalueofthesuppiyshallnotincludeanydiscountwhichisgiven,before oratthetimeofthesupplyifsuchdiscounthasbeendulyrecordedintheinvoice issuedinrespectofsuchsupplyandincasethediscountisgivenafterthesupply hasbeeneffected,ifsuchdiscountisestablishedintermsofanagreemententered intoatorbeforethetimeofsuchsupplyandspecificallylinkedtorelevantinvoices; andfurthertheinputtaxcreditasisattributabietothediscountonthebasisof d'ocumentissuedbythesupplierhasbeenreversedbytherecipientofthesupply' Itisobservedthatnoneoftheseconditionsaresatisfiedinthematterunder referenceaSperavermentsmadebythem,sincetheproposeddiscountwouldnotbe recorded^{in the invoice issuedin respect of such supplyand in caseof the} discountgivenafterthesupplyhasbeeneffected,itisnotestablishedintermsof an agreement^{enteredinto at or beforethe time of such supply nor is the input tax} creditasisattributabletothediscountproposedtobereversedbytheappellant whoistherecipientofthesupply.Hencethevaluewouldcontinuetobethevalue asdeterminedundersectionl5(1),onwhichGsThasbeencharged.Thereappears tobenoambiguityinlawwhenappliedtotheschemeasmentionedintheir applicationforadvanceruling'AconjointreadingofSections15and16leadsto the conclusion^{thata registered person is entitledto take full credit of the inputtax} chargedonthesupplyofgoodsorseryicesorboth.Theprovisionsofthesecond provisotosection16(2)wouldcomeintoplayonlywherethebuyer/recipientfails topaythesupplierofgoodstheamounttowardsthevalueofthesupply.Thisis notthesituationhere.ThebuyerhasdischargedtheGsTchargedonthe undiscountedtransactionvalueatthetimeofsupply.lnthecircumstances,ifthe GsTchargedandpaidisnotreversed/refundedinwholeorpartsubsequentlyin anymannerorcircumstances,thecreditavailedontheSameneednotbereversed.

¶100

10'DiscussionsintheGSTCouncilmeeting,thoughnotcontrollinglegal interpretationsoftheAct,areneverthelessentitledtosomeweightasithas persuasivevalue.WefindfromtheminuteddiscussionofthesthGsTCouncil meeting,whichdiscussedtheActandapprovedtheSameforpresentingtothe Parliament,^{it is stated that the provisionof section 16(2) is an anti-evasion} Page^{12 of 15}

¶101

measure introduced in the law. Further discussions in the 29th GST Council meeting also establishes the intention of the provision as an anti-evasion measure and a provision to facilitate the prompt payment to suppliers, especially from MSME Sector. The said provision does not appear to find any application in the situations like the one at hand wherein, the appellant is in receipt of goods/services and has declared that the commercially agreed price along with GST charged as recorded in the tax invoice is paid in full to the supplier.

¶102

We have also examined CBIC's circulars referred to by the appellant. Circular No. 122/3/2OIO dated 30.04.2010 issued by CBEC in the context of Rule aQ) of the CENVAT Credit Rules 2OO4 in respect of Services, states as follows:

¶103

(b) In the cases tahere the receiuer of seruice reduces the amount mentioned in the inuoice/bill/challan and makes discounted payment, tlrcn it shauld be token a.s final pagment towards the provision of seruice. Tlrc mere fact that finally settted. amount is Iess than the amount slwwn in the inuoice d.oes not alter the fact that seruice charges haue been paid and thus the seruice receiuer is entttled to take credit prouided. he has also paid the amount of seruice tax, (whether proportionatelg reduced or tlrc originat amount) to the seruice prouider. The inuoice would in fact stand amended to that extent. Tlrc credit taken utould be equiualent to the amount ttutt is paid. as seruice tqx. Howeuer, in case of subsequent refund or extrq. pagment of seruice tax, the credit would also be altered accordingly.

¶104

and Circular No.877/I5/2OO8-Cx dated 17th November 2008, regarding reversal

¶105

of CENVAT Credit in case of trade discount. is as under:

¶106

Representations haue been receiued from trade and industry seeking claifi.cation on the issue whether proportionate credit should be reuersed in cases where a manufacturer auails credit of the amount of dutg paid bg supplier as reflected. in the excise inuoice, but subsequentlg tlrc supplier allows some trad.e discount or red.uces the pice, without reducing the dutg paid bg him.

¶107

The issue ha.s been examined. Since, the discount in such cases are giuen in respect of the ualue of inputs qnd not in respect of the dutg paid by the supplier, the effect of reduction of ualue of inputs mag be that the dutg required. to be paid. on the tnputs uas /ess thon what has been actually paid bg the inputs manufacturer. Houteuer, the fact remains thot the inputs manufacturer had paid. the higtLer dutg. RuIe 3 of Cenuat Credit Rules, 2004 attouts credit of dutg "paid." bg ttrc inputs manufacturer and not dutg "pagable" bg *Le said manufacturer. Tlrcre are many judgements of Hon'ble Tibunal in this regard which haue confirmed this uiew.

¶108

3' In uieu of aboue, it is claified that in such c@ses, the entire amount of duty paid by the manufacturer, as sLnun in the inuoice would. be auailabte as credit irrespectiue of the fact that subsequent to cleqrance of the good.s, the pice is reduced by wag of discount or otherwise. Howeuer, if the duty paid is atso reduced, along with the reduction in pice, the reduced excise dutg would only be auailable as credit. ft maa troweuer be anftrmed that the supplier, who ltlols paid dutg, has not filed/^{claimed the refundon account} of reduction in price.

¶109

Page 13 of 15

¶110

maa Lnuteuer be anfirmed that the supplier, who has paid dutg, has not fiIed/^{claimed the} refund on account of reduction in pice.

¶111

Though the circulars issued in the context of another Act are also not binding, they too have persuasive value. Like in the case of rule 3 of Cenvat Credit Rules, 2OO4 which refers to credit of duty "paid" by the inputs manufacturer and not duty "payable", section 16 of the Act refers to the credit of input tax 'charged' and not "chargeable". The circulars thus supports the view that taxes paid and not subsequently reduced would be fully available as credit to the recipient.

¶112

In view of the above discussions, we set aside the ruling of the Original Advance Ruling Authority and rule as under

¶113

RULING

¶114

Considering the facts and circumstances of the appeal, the appellant M/s MRF Ltd can avail the Input Tax Credit of the full GST charged on the undiscounted supply invoice of goods/ services by their suppliers. A proportionate reversal of the credit is not required to be done by them in case of a post purchase discount given by the supplier to them through the C2FO platform, in the circumstances mentioned by them and discussed above. This is subject to their fulfilling the other conditions stipulated by law and that the GST paid by them for the said goods/ service is not reversed or reimbursed/ re-credited etc to them in any manner by the supplier or on his behalf, after the credit has been availed by M/s MRF. The ruling is limited to cases where a post purchase discount is extended by the supplier of the goods or services to the appellant on account of their registering in the interactive automated data exchange arrangement setup by C2FO India LLP, which is the subject matter of this Advance Ruling.

¶115

(T.V.SOMANATHAN) Commissioner of Commercial Tax Tamilnadu /Member tuL\R

¶116

I rl J.i: (M. AJrT KUMAR) Pr.Chief Commissioner of GST & Excise Chennai Zone / Member AAAR

M/s. MRF Ltd,

/By^SPAD/

Page 14 of 15

Old No.124/^{New No'114,Greams Road'} Thousand^{Lights, Chennai-600006}

¶122

Copy to

¶123

l.AdditionalChiefSecretary/CommissionerofCommercialTaxes,IlFloor' F;zlhilagam,^{ChePauk'Chennai-5'}

¶124

2.ThePrincipal^{Chief Commissionerof GST & Central Excise' 26/l'} Mahatmac.,,ar,iRoad,Nungambakkam,Chennai-600034.

¶125

The^{Advance ruling AuthoritY} 4. The Commissioner^{of GST & C'Ex''} Chennai^{North Commissionerate'}

¶126

The^{AssistantCommissioner (ST)}

¶127

Master^{File/SPare-2'}

¶128

Page 15^{of 15}

TN/AAAR/04/2019(AR) of Mrf Limited

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TN/AAAR/04/2019(AR) of Mrf Limited

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