Page 36 - GSTL_23rd April 2020_Vol 35_Part 4

J64 GST LAW TIMES [ Vol. 35
terms of Rule 37 of the CGST Rules. However proviso to Rule 37 of CGST Rules
states that the value of supplies made without consideration as specified in
Schedule I of the CGST Act shall be deemed to have been paid for the purposes
of the second proviso to sub-section (2) of Section 16 of the CGST Act, 2017.
Therefore, supplies between distinct persons, where there is no payment of con-
sideration by recipient unit to the supplying unit, the availment of input tax
credit by the receiving unit is not restricted.
Advance Rulings
(1) The Authority for Advance Ruling under GST, West Bengal in the
case of GKB Lens Pvt. Limited, reported in 2018 (13) G.S.T.L. 343
(A.A.R. - GST), ruled that an assessee has the option of not supply-
ing goods to its branches under the First Proviso of Rule 28 and is
eligible to value these goods by applying the terms of the Second
Proviso to Rule 28 of CGST Rules. The expression “where the recip-
ient is eligible to take full input tax credit”, as used in the Second
Proviso to Rule 28 of CGST Rules, 2017, means that the recipient
will be eligible to take full tax credit of the amount of tax paid by
the supplier as mentioned in the respective invoice or any other
document valid under Section 16(2)(a) of CGST Act.
The cited Ruling of AAR, West Bengal is modified by Appellate Au-
thority for Advance Ruling under GST, West Bengal, reported in
2018 (17) G.S.T.L. 698 (App. A.A.R. - GST), held that from a plain
reading of law lays down under Section 16 of the GST Act, it is clear
that, inter alia, input tax credit is available only when the recipient is
in possession of a tax invoice or debit note issued by the supplier
registered under GST Act, and in case of a supply between distinct
and/or related persons, as between Head Office and Branches, the
value declared in the invoice shall be deemed to be the open market
value of the goods or services supplied. It is therefore clear that if
the value declared in such invoice is zero no input tax credit is
available to the recipient. It is seen that the question raised by M/s.
GKB Lens Pvt. Ltd., was correctly answered by the Authority of
Advance Ruling. However, it may be clarified that no input tax
credit is available to the recipient of goods/service if the value de-
clared by the supplier in the invoice/debit note is zero. According-
ly, AAR order is modified to the extent of non-availability of ITC by
the applicant.
(2) The Authority for Advance Ruling under GST, Tamil Nadu in the
case of Sanghvi Movers Limited, reported in 2019 (27) G.S.T.L. 588
(A.A.R. - GST), ruled that the assessee is not eligible for full input
tax credit but only to the extent specified in the restrictions as per
second proviso to Section 16(2) of CGST Act and Rule 37 of CGST
Rules read with Section 20(iv) of IGST Act, subject to fulfilment of
all other conditions under said sections.
Conclusion
The valuation rules prescribes that the value of supply of goods or ser-
vices between distinct or related persons should be open market value, and if the
open market value is not available then value should be cost of provision and the
value shall be 110% of the cost of production or manufacture or acquisition oth-
erwise determine using reasonable means consistent with the principle and gen-
GST LAW TIMES  23rd April 2020  156