Summary:
The key issue involved is levy of IGST on expenses incurred by the Petitioner that are not cross-charged with other offices. The Petitioner sought to quash the Order passed by the Adjudicating Authority. The Court held that the matter should be reconsidered by the Adjudicating Authority in light of the Circular No. 199/11/2023-GST and the judgment passed by this Court in the case of Metal One Corporation India Pvt. Ltd. & Ors. v. Union of India & Ors.
Facts:
- The Petitioner incurred common expenses and did not cross charge the same to the other offices of the Petitioner. The Adjudicating Authority passed the order (‘the Demand Order’) confirming demand of IGST on expenses to be cross charged
- The Petitioner filed this petition seeking to quash the Demand Order
Issues before the Court:
- Whether IGST was required to be paid on expenses incurred by the Petitioner that have not been cross-charged with other offices?
Discussion and Ruling:
- On perusal of the Demand Order, it clearly shows that there were no cross-charges of expenses with the other offices
- The Demand Order was passed applying the second proviso to Rule 28 of the Central Goods and Services Tax Rules, 2017 (‘the CGST Rules’) but without giving effect to the clarification given in the Circular No. 199/11/2023-GST dated 17.07.2023 (‘the Circular’) and judgment passed in the case of Metal One Corporation India Pvt. Ltd. & Ors.
- The second proviso to Rule 28 of the CGST Rules provides that where the recipient is eligible for full input tax credit (‘ITC’), the value declared in the invoice shall be deemed to be the value of said supply of services
- The Circular clarified for the calculation of the value of goods and services between distinct entities in the following two situations:
- Where full ITC is available to the recipient and an invoice has been issued, the value declared on the invoice shall be deemed to be the open market value for said supply
- Where full ITC is available to the recipient, but no invoice has been issued, the value of such supply may be deemed to be declared as ‘Nil’ and may be deemed as open market value in terms of the second proviso to Rule 28 of the CGST Rules
- Similarly, in the case of Metal One Corporation India Pvt. Ltd. & Ors., this Court observed that since no invoices were generated, the value of the service rendered would be NIL and hence no tax liability would be imposed
- With respect to the issue in question, the Court held that a fresh order ought to be passed considering the benefit given in Circular No. 199/11/2023-GST and the judgement passed in Metal One Corporation India Pvt. Ltd. & Ors.