Clarification on Input Tax Credit for Transportation Services under IGST Act under Circular 184

02March

Clarification on Input Tax Credit for Transportation Services under IGST Act under Circular 184

<div style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;margin:0px 0px 16px;padding:0px;word-spacing:0px;">The Central Board of Indirect Taxes and Customs (CBIC) has released an important circular aimed at providing clarity on the entitlement of input tax credit concerning the transportation of goods under the Integrated Goods and Services Tax Act (IGST Act). With the complexities arising from the provisions of the IGST Act, particularly due to the <span>2018 </span>amendments, this circular is significant for businesses engaged in exporting goods.</div><h3 style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:1.25em;font-style:normal;line-height:1.25;margin:10px 0px 0px;word-spacing:0px;">Key Highlights:</h3><ol style="background-color:rgb(250,250,250);color:rgb(62,63,66);font-family:'-apple-system', BlinkMacSystemFont, 'Segoe UI', 'Noto Sans', Helvetica, Arial, sans-serif, 'Apple Color Emoji', 'Segoe UI Emoji';font-size:14px;font-style:normal;font-weight:400;list-style:decimal;margin:0px;padding:0px 0px 0px 2em;word-spacing:0px;"><li style="margin-bottom:0px;margin-right:0px;margin-top:0px;padding:0px;"><div style="margin:0px;padding:0px;"><strong>Determining Place of Supply</strong>:<br>The circular clarifies that when transportation services, including those by mail or courier, are provided for goods transported to a location outside India, the place of supply shifts to the destination of the goods. This is particularly relevant for situations where both the supplier and recipient of the service are located in India. According to the IGST Act’s sub-section (8) of section <span>12 </span>, the place of supply would thus be determined as per the destination where the goods are being sent [<span style="padding:0px 2px;"><strong>2</strong></span><span> </span>].</div></li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;"><div style="margin:0px;padding:0px;"><strong>Nature of Supply</strong>:<br>The supply of transportation services in this scenario is categorized as inter-State supply. Since the supplier is in India and the place of supply is determined to be outside India, integrated tax (IGST) becomes applicable. This means that the service provider will charge IGST on the supply of services [<span style="padding:0px 2px;"><strong>2</strong></span><span> </span>].</div></li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;"><div style="margin:0px;padding:0px;"><strong>Eligibility for Input Tax Credit</strong>:<br>A notable point addressed in the circular is regarding the eligibility of Indian recipients to avail input tax credit on the IGST charged for transportation services destined for foreign locations. The circular confirms that there are no restrictions on claiming input tax credit if the place of supply is outside India. Hence, recipients can claim the input tax credit on the services received, provided they meet the conditions outlined in sections <span>16 </span>and <span>17 </span>of the CGST Act [<span style="padding:0px 2px;"><strong>2</strong></span><span> </span>].</div></li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;"><div style="margin:0px;padding:0px;"><strong>Implementation and Communication</strong>:<br>The CBIC encourages the dissemination of this circular’s contents through trade notices, and it invites feedback regarding any challenges in implementation. This initiative aims to ensure that the new guidance is uniformly followed across various tax formations, thereby promoting compliance and clarity within the industry [<span style="padding:0px 2px;"><strong>4</strong></span><span> </span>].</div></li><li style="margin-bottom:0px;margin-right:0px;margin-top:10px;padding:0px;"><div style="margin:0px;padding:0px;"><strong>Practical Example</strong>:<br>An illustrative example is provided in the circular to clarify these points. For instance, if a registered person in West Bengal (X) exports goods to Singapore (Y) and engages a transportation service, the place of supply would be Singapore, and X would be eligible to claim input tax credit on the IGST charged for these transportation services [<span style="padding:0px 2px;"><strong>2</strong></span><span> </span>].<a href="https://cms.plasament.com/storage/cir-184-16-2022-cgst.pdf">cir-184-16-2022-cgst</a><br> </div></li></ol>

Clarification on Input Tax Credit for Transportation Services under IGST Act under Circular 184

Categories:

Share:

Related Post