ITC can be claimed if consideration paid through book adjustment : AAR

The Applicant is engaged in the manufacturing and retailing of jewellery and articles made of gold, silver, platinum, diamonds and other precious stones under the brand name “Senco Gold & Diamonds”. Apart from his own retail stores, the Applicant also maintains a network of
franchisee-operated stores. He grants such a franchisee the right and license to operate a showroom and to use, in connection therewith, certain Proprietary Marks and System in accordance with a Franchise Agreement (hereinafter the Agreement), a copy of which has been submitted at the time of Hearing. The Applicant raises tax invoices on the Franchisee for
the supply of jewellery and other articles and also for Franchise Support Services in terms of the Agreement periodically. On its part, the Franchisee also raises tax invoices on the Applicant for the supply of old gold, silver etc., received from the customers. The Applicant intends to settle the mutual debts through book adjustments.

Held

• Unless law specifically restricts recipient from claiming input tax credit when consideration is paid through book adjustment, credit of input tax cannot be denied on this ground alone.

• Thus, applicant can pay consideration for inward supplies by way of setting off book debt. The GST Act and rules made there under do not restrict recipient from claiming input tax credit when consideration is paid through book adjustment, subject to conditions and restrictions as may be prescribed and in manner specified in sections 16 and 49 of the CGST Act, 2017.

AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL

Senco Gold Ltd., In re

ORDER NO. 02/WBAAR/2019-20

MAY  8, 2019