Branch eligible for Input Tax Credit for GST paid by Head Office: AAAR [Read Order]

The Tamilnadu State Appellate Authority for Advance Ruling (AAAR) held that Input tax credit of tax paid by Head office for the furtherance of business, subject to other conditions of eligibility to such credit as per Section 16 of CGST/TNGST Act 2OI7.

SML is engaged in the business of providing medium-sized heavy-duty cranes on rental/ lease/ hire basis to its clients without transferring the right to use the cranes to minimize transportation time and costs. Under GST, SML has obtained registration for 1O locations across India, including its head office (“SML Maharashtra”)

SML branch offices receive inquiries from various customers for supply of cranes on hire charges. SML branch offices negotiate with customers and receive final work orders from customers. The title and ownership of all the different types of cranes along with their components vest with SML Maharashtra. Therefore, on receipt of the final work order, all the SML branch offices, in turn, raise internal work orders on SML, Maharashtra to provide requisite cranes on hire charges along with appropriate support and assistance to various customers across India.

SML Maharashtra discharges IGST on the value of hire charges recovered from the appellant treating the same as inter-state supply of service. Consequently, the recipient i.e. the appellant avails credit of IGST charged/paid by SML Maharashtra on the value of hire charges charged on the invoice. The appellant sought the authority for the advance ruling to determine the admissibility of ITC of the IGST paid by SML Maharashtra in the hands of the appellant.

The Order was rendered by the Tribunal comprising of Ajit Kumar and T.V.Somanathan on an appeal given by SML.

The court observes that there is no reason to restrict the eligibility of ITC credit under Section 16 (2) of the Act of which the input tax credit paid by the SML HO, in the hands of the appellant as it has been substantially brought out that the ‘consideration’ stands paid to the SML HO either by the customer of the Appellant or by setting off against the payables of the appellant to SML HO, in respect of lease/hire of Cranes, etc which is as per the established accounting principles.

Court held that GST paid by the SML Maharashtra on the lease of Cranes, to their distinct personalities, for sub-lease to the ultimate customer is eligible as a credit in the hands of other branches.