Karnataka High Court (‘HC'), in the case of Toyota Kirloskar Motor Pvt. Ltd, has granted stay on the Show Cause Notice (‘SCN') issued for denying ITC of GST paid on secondment of employees from a foreign entity to an Indian entity.
Dispute
·
The taxpayer paid GST under Reverse Charge Mechanism
(‘RCM') on secondment of employees pursuant to the decision of Hon'ble Supreme
Court in the case of C.C., C.E. & S.T. vs. Northern
Operating Systems, 2022-VIL-31-SC-ST dated 19-05-2022, in a Service Tax
matter.
·
The Department issued SCN proposing to deny Input Tax
Credit (‘ITC’) of the same applying time restriction under Section 16(4) of the
CGST Act. The Department also proposed to levy interest and penalty.
HC Decision
The
Hon'ble HC has granted interim stay on the SCNs and issued Notices to various
respondents.
| Remarks
·
As expected, the matter was bound to go to the Courts.
At the same time, some taxpayers would think that they should wait for the
final judgement in this case to take up their matter accordingly.
·
In our view, such approach sometimes backfires and
Courts may only give relief to Petitioners which have knocked their doors and
not to taxpayers in general. Therefore, we suggest all concerned taxpayers to
file writs in their jurisdiction in line with the present writ.
| Insights
1.
The present case does not deal with the valuation
aspect but only the aspect of applicability of time limit of taking ITC in
terms of Section 16(4) of the CGST Act. Thus, the value to be taken in terms of
Rule 28 of the CGST Rules is still a question to ponder upon.
2.
The decision, when attain finality, would also shed
light on the larger question of eligibility of ITC where GST is paid under RCM
after the expiry of time limit under Section 16(4).
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