ITC can be Availed on IGST Paid on Imports for both Intra Inter-State Sales: AAR

Recently, the Authority for Advance Ruling (AAR) has given a ruling that Input Tax Credit (ITC) can be availed on the Integrated Goods and Services Tax (IGST) paid on imports for both intra-state and inter-state sales. This decision will have a significant impact on businesses in India, especially small and medium-sized enterprises (SMEs) and startup companies.

Understanding the Ruling

The ruling came in response to a query from a company that imports goods and sells them in both the domestic and international markets. The company had sought clarification on whether it is eligible for ITC on the IGST paid on imports. The AAR held that the company is entitled to claim the credit, as it is using the imported goods for both intra-state and inter-state sales.

The AAR also clarified that the eligibility for ITC will depend on the usage of the imported goods. If the goods are used for both intra-state and inter-state sales, then the IGST paid on imports will be eligible for ITC. However, if the imported goods are used only for inter-state sales, then the IGST paid on imports will not be eligible for ITC.

Impact on Businesses

The ruling is expected to have a positive impact on businesses in India, as it will provide them with greater clarity on their eligibility for ITC on IGST paid on imports. This will be particularly beneficial for SMEs and startup companies, as they often face challenges in understanding and complying with the complex GST regulations.

By allowing ITC on IGST paid on imports for both intra-state and inter-state sales, the ruling will also help businesses reduce their tax liability, which will improve their cash flow and bottom line. This will enable them to invest more in their businesses and drive growth.

Conclusion

The AAR's ruling on ITC on IGST paid on imports for both intra-state and inter-state sales is a positive development for businesses in India. It will provide them with greater clarity and certainty on their eligibility for ITC, which will help them reduce their tax liability and improve their cash flow. SMEs and startup companies, in particular, will benefit from this ruling, as they often struggle to understand and comply with the complex GST regulations.