Telangana AAR: Selection of Lower Tax Rate Doesn’t Permit Availing ITC Under GST

The petitioner via opting to pay the GST at a lower rate by not claiming the ITC on the goods and services used in his supplies has renounced his right to claim for the input tax credit, the Telangana Authority of Advance Ruling (AAR) mentioned.

The bench of S.V. Kasi Visweswara Rao and Sahil Inamdar noted that the supply of a car was made in July 2023 when the applicant was still claiming for the lower rate of tax on his supplies by forfeiting his right to claim the ITC on the purchase of goods and services and therefore the ITC on the purchase of a car is not available to the petitioner.

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The petitioner, Noori Travel furnishes the services of Transport of passenger services via any Motor vehicle made to carry passengers in which the cost of fuel is contained in the consideration levied from the service recipient.

The petitioner filed for the 5% GST on the output services, with limited ITC. According to the notification, the GST is to be collected from the receiver at a 5% rate, given that credit of Input tax levied on goods and services utilised in supplying the services, excluding the input tax credit of input service for the same business (i.e. services procured via another service provider of transporting a passenger in motor vehicles or rent of a motor vehicle), has not been carried.

The petitioner complied with the aforesaid policy till 31.07.2023. The petitioner has revised the Output tax rate from 5% to 12% with full ITC. The petitioner has furnished a letter at the GST office. Consequently, the petitioner collected 12% Output and paid before the government w.e.f 01.08.23. The Input Tax Credit has been used by the petitioner has been received on input services, goods, and vehicle purchases.

A New car, a Mercedes Benz has been purchased by the applicant. The applicant filed a GST amount of Rs 13,94,702. The applicant is asking to take the same GST amount of Rs. 13,94,702 as eligible ITC and proposes to use the GST amount of Rs 13,94,702 proportionally over 5 Years.

GST Records (GSTR 2B) has been validated by the petitioner, the supplier uploaded the invoice in July 2023 GSTR 2B Return, but the purchase invoices issued are on 4.8.2023 and the Sale certificate (form 21) issued on 4.8.2023.

The applicant asks for an advance ruling on the problem of whether the GST amount of Rs.13,94,702 can be claimed as an ITC.

The AAR ruled that the supply of the car was made in July 2023 when the petitioner was still claiming for the lower tax rate on his supplies by forfeiting his right to claim the ITC on the purchase of goods and services and therefore the ITC about the purchase of the car is not available to the petitioner.