ITC Entitlement where place of supply is determined under proviso to section 12(8) of IGST Act

As a business owner in India, it is crucial to understand all the aspects of the Goods and Services Tax (GST). One such aspect is ITC Entitlement where place of supply is determined under proviso to section 12(8) of IGST Act. In this article, we will discuss everything you need to know about this provision.

Understanding ITC Entitlement

ITC stands for Input Tax Credit, which is the credit that a business can claim for the tax that it has paid on its purchases. The credit can be used to offset the tax liability on its sales. ITC entitlement where the place of supply is determined under proviso to section 12(8) of IGST Act is a provision that allows a business to claim credit for the tax that it has paid on the purchases that it has made in a different state or UT from where it is registered.

For example, if a business is registered in Delhi and it purchases goods from a supplier in Mumbai, it can claim credit for the tax that it has paid on the purchase in Mumbai. The credit can be used to offset the tax liability on its sales in Delhi.

Understanding Place of Supply

Before we dive deeper into the provision, it is essential to understand what the place of supply is. The place of supply is the place where the supply of goods or services is deemed to have taken place for the purpose of GST.

The GST laws have laid down specific rules for determining the place of supply for goods and services. The rules vary depending on the type of supply, i.e., whether it is an intra-state supply or an inter-state supply, and whether it is a supply of goods or services.

Proviso to Section 12(8) of IGST Act

Now, let us understand the provision in more detail. The proviso to section 12(8) of the IGST Act states that where the place of supply of goods or services or both is in a state or UT other than the state or UT of the registration of the recipient, the ITC entitlement shall be available to the recipient of goods or services or both.

In simple terms, if a business has purchased goods or services or both from a supplier in a different state or UT, it can claim the credit for the tax paid on the purchases in its GST returns. The credit can be used to offset the tax liability on its sales in its state or UT of registration.

Conditions for Claiming ITC Entitlement

However, there are certain conditions that a business needs to fulfill to claim ITC entitlement where the place of supply is determined under proviso to section 12(8) of IGST Act. These conditions are:

The recipient of the goods or services or both should be registered under GST.
The recipient should have received the goods or services or both in the course of inter-state trade or commerce.
The recipient should have paid the tax under IGST for the purchase of goods or services or both.
The supplier of the goods or services or both should have furnished a valid GST invoice or debit note.

If a business meets all these conditions, it can claim the credit for the tax paid on the purchases in its GST returns.

Conclusion

ITC entitlement where place of supply is determined under proviso to section 12(8) of IGST Act is a beneficial provision for businesses that operate in multiple states or UTs. It allows them to claim credit for the tax paid on purchases in different states or UTs, which can reduce their tax liability and improve their cash flow. However, it is essential to meet all the conditions specified to claim the credit successfully.