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The Hon’ble Maharashtra Authority for Advance Ruling (“the Mah AAR”) in the matter of Deccan Wheels [ORDER No.GST-ARA-103/2019-20/B-81 dated October 25, 2021], ruled that Input Tax Credit cannot be claimed on Indirect Expenses like rent, commission, professional fees, telephone incurred for purpose of business.
Factually, the Deccan Wheels (“the Applicant”) purchases second-hand cars (goods) and after minor processing on it such as change of tires, change of battery, painting, denting, repairs, servicing, internal cleaning, polishing, etc, which does not change the nature of the goods, the said goods are sold. The Applicant does not claim the Input tax credit (“ITC”) on the purchase of second-hand goods and has opted for Margin Scheme and applies GST rate as per Notification No 8/2018- Central Tax (Rate) dated January 25, 2018 (“Goods Rate Notification”).
The Applicant has sought the advance ruling on whether ITC can be claimed on other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc.
The Hon’ble Mah AAR observed that the concessional rate under the Goods Rate Notification shall not apply if the supplier of such goods has availed ITC as defined in Section 2(63) of the Central Goods and Services Tax Act, 2017(“the CGST Act”), CENVAT as defined in CENVAT Credit Rules, 2004 or the ITC of Value Added Tax or any other taxes paid on such goods.
Further, held that since the Applicant has been availing the benefit of the Goods Rate Notification and paying GST at a concessional rate they shall not avail ITC.
This notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods.
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