The Tamil Nadu Advance Ruling Authority (ARA) has said tyre major MRF may avail of input tax credit only to the extent of the value of the invoice in question, not on the discounts offered by vendors on interface software.
The company intended to subscribe to an online platform, C2FO, which would connect the buyer with vendors. Those of the latter that are registered with the e-platform place a discount offer, either annual percentage rate or a flat discount, to receive early payment. Invoices for discount are picked up by the software algorithm, based on which the discount offers can be varied.
MRF approached the ARA to check if it legally could avail of the input tax credit on the entire GST charged on the supply of invoice or if a proportionate reversal of the tax was required if the vendor gave a post-purchase discount, based on their early payment. If input tax credit was taken on the full amount, the difference should be reversed.
Abhishek Jain, tax partner at consultants EY India, said that most businesses had taken a contrary position on this and claimed input tax credit of the entire GST paid by the supplier and that the government should consider an explicit clarification on the issue, to avoid any unwarranted and prolonged litigation on this aspect
