“SML (Sanghvi Motors Limited)” is engaged in the business of providing heavy duty cranes on rental basis to it’s clients “without transferring the right to use the cranes” to minimize transportation time and costs. SML has obtained GST registration for 10 locations across India, including its head office in Maharashtra. SML branch offices negotiate with customers and receive final work orders from customers.
The title and ownership of all types of cranes along with their components stays with the head office i.e. SML Maharashtra. Therefore, on receipt of the final work order, all the SML branch offices initiate with work orders received by Head office. Branches provide cranes on hire charges along with appropriate support and assistance to various customers across India.
Head office levy IGST on the value of hire charges, treating it as inter state supply of service. The recipient i.e. the appellant (branches) avails credit of IGST charged by Head office on the value of hire charges in the invoice.
The appellant asked the authority for the advance ruling to determine the admissibility of ITC of the IGST paid by head office.
The court observes that there is no reason to restrict the eligibility, in the hands of branch, for the ITC credit u/s 16 (2) of the Act where input tax credit has been paid by the HO. It has been noticed that the ‘consideration’ paid to the SML HO either by the customer of the Appellant (branch) or by setting off against the payables of the appellant to SML HO, in respect of hire of Cranes, as per the established accounting principles.
Tamilnadu State Appellate Authority for Advance Ruling (AAAR) ruled that Input tax credit (ITC) of tax paid by Head office for the furtherance of business, is eligible for credit in the hands of branches. But this is allowed subject to other conditions of eligibility to such credit as per Section 16 of CGST/IGST Act 2017.
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