In AAR No.05/AP/GST/2023 -AAR- M/s. Vedmutha Electricals India Pvt. Ltd. held eligible for full GST credit on tax invoices issued by supplier, irrespective of subsequent commercial or financial credit notes: AAR (Andhra Pradesh)
Members K. Ravi Sankar & R. V. Pradhamesh Bhanu [26-05-2023]

Read Order: In Re: v. M/s. Vedmutha Electricals India Private Limited

Chahat Varma

New Delhi, June 27, 2023: The Andhra Pradesh bench of the Authority for Advance Rulings has ruled that M/s. Vedmutha Electricals India Private Limited (applicant) was eligible to take full credit of GST charges mentioned in the tax invoice issued by M/s. Gold Medal Electricals Private Limited (Supplier). The Authority affirmed that the applicant was entitled to claim the full GST credit paid by the supplier to the government, regardless of any subsequent commercial or financial credit notes issued.

The specific issue involved in the present case was that the applicant was engaged in the business of supply various electronic items. The applicant purchased various electronic items from M/s. Gold Medal Electricals Private Limited (Supplier). They sought an advance ruling regarding their eligibility to claim full GST credit for tax invoices issued by their supplier. The query specifically pertained to situations where a commercial or financial credit note was later issued by the supplier for a partial amount of the invoice, despite the GST already being paid to the government.

The Authority observed that the provisions of section 15(3)(b) of the Central Goods and Services Tax (CGST Act) can only be applicable if there was a prior agreement and a link established between the relevant invoices and the discounts provided. In this case, no such correlation was found between the credit notes issued by the supplier and the applicant, except for mentioning the scheme and the goods for which the credit notes were given. As a result, the benefit of reducing the value of the discount from the transaction value, as per the provisions of section 15(3)(b), was not allowed. Therefore, the contention of the applicant, was deemed correct.

The Authority held that the post-supply discount received by the applicant from the supplier did not impact the transaction value between the two parties. Therefore, the applicant was eligible to take full credit of the GST charged in the tax invoice and was not required to reverse the Input Tax Credit (ITC) to the extent of the financial or commercial credit notes issued by the supplier.