Input GST Credit Available Only on Receipt of Goods
Normally, orders are placed for supply of goods. The price for the supply of goods may be ex-works price or F.O.R Price. The situation of receipt of goods by the recipient (Buyer) in case of ex-works price and the situation of receipt of goods by the recipient (Buyer) in case of F.O.R Price is different from legal point of view. In the case of ex-works price, delivery completes at factory. Risk and Ownership passes on to the buyer at the factory gate. But in the case of F.O.R price, delivery completes at buyers place. Risk and ownership continues with the seller till delivery of goods at buyers place. One of the requirements for availing input tax Credit is “The registered person has received the goods or services or both,”
This article discusses on receipt of goods for availing input tax credit in case of purchases of goods on ex-factory price basis :
For the purpose of understanding the questions involve, following relevant provisions of the GST law are highlighted:
As per section 16(2) of CGST Act, registered taxable person shall not be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless following conditions are satisfied:
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under GST Act or such other taxpaying document as may be prescribed,
(b) he has received the goods or services or both,
Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;
(c) subject to section 41 of CGST Act, the tax charged in respect of such supply has been actually paid to the credit of the appropriate Government, either in cash or through utilization of input tax credit admissible in respect of the said supply . and
(d) he has furnished the return under section 39 [every taxable person is required to file electronic return every month as per section 39 of CGST Act].
On careful perusal and consideration of the above provisions as stated in section 16(2) (b), it is clear that ITC can be taken even if goods do not physically reach the place of registered person in case of purchases of goods are on ex-works price basis. This is supported by the explanation appended to section 16(2) (b) which states as follows : For the purpose of section 16(2)(b) of CGST Act, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise.
When the goods are dispatched through vehicles, Delivery to transporter by supplier is sufficient to take input tax credit. The expression “any other person “and the expression “otherwise” implies “the person on the behalf of recipient i.e. Transporter” and “by way of transportation contact “respectively.
Section 39(1) of Sale of Goods Act also states that delivery of goods to carrier is prima facie delivery to buyer. As per section 23(2) of Sale of Goods Act, if, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee, for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. It does not make difference whether the bailee or buyer was named by buyer or not.
SUPREME COURT JUDGEMENT
In Manwar Tent Factory v. UOI AIR 1990 SC 1735, it was held that when contract stipulates for delivery of goods F.O.R. basis at place of despatch, risk passes from consignor to consignee as soon as goods are loaded at the place of despatch. Thus, transporter is Agent of buyer for the purpose of collection of goods and Bailee for the purpose of transportation goods from supplier place to buyers place . Hence, in my opinion, delivery to transporter is delivery to agent (on the direction of the registered person/ recipient ) and ITC can be taken even if goods do not physically reach the place of registered person.
Therefore, recipient / buyer must take input GST credit on delivery to transporter by supplier on the direction of the registered person/ recipient and Accordingly , the supplier is required to upload the tax invoices issued in a particular month in the particular month Return- GSTR -1 and recipient must take input GST credit in the particular month Return- GSTR-3B. In case of non-receipt of goods from Transporter due to lost in any way, there should be reversal of input GST Credit before filing of GST Annual Return.