Page 36 - DTPA Journal Aug 18

DTPA - J | 2017-18 | Volume 3 | August 2018

recipient, or the final importer, clears the goods from the goods or services or both made by him or by his agent
customs, he shall have to pay the IGST again as per the but excludes tax payable by him on reverse charge
tax determined under section 3 of the Customs Tariff basis;
Act, 1975. The final importer shall have to pay the IGST
Section 16(1):
twice on the same goods. Although he is eligible to claim
ITC against taxes paid on both the occasions, but his Every registered person shall, subject to such
capital will be blocked and most probably he may not be conditions and restrictions as may be prescribed and in
able to consume the total ITC and the amount may the manner specified in section 49, be entitled to take
credit of input tax charged on any supply of goods or
remain blocked.
services or both to him which are used or intended to
EXAMPLE:
be used in the course or furtherance of his business
'A' imports goods worth Rs. 100000/- from China and and the said amount shall be credited to the electronic
after it enters the territorial waters of India but before it credit ledger of such person.
crosses the customs clearance station of India, sells the
Section 41
goods to 'B'. 'B' shall have to pay IGST, say Rs. 18000/-,
i.e. 18% on Rs. 100000/-, charged by 'A' and again (1) Every registered person shall, subject to such
when he clears the goods from the Customs, he shall conditions and restrictions as may be prescribed, be
have to pay IGST again determined as per section 3 of entitled to take the credit of eligible input tax, as self-
the Customs Tariff Act, 1975, say, 18000/-. It means that assessed, in his return and such amount shall be
B shall have to pay 36000/- on imports of Rs. 100000/-. credited on a provisional basis to his electronic credit
Now when he sells the goods, say at Rs. 120000/-, he ledger.
shall charge Rs. 21600 /- from the customer. Out of ITC (2) The credit referred to in sub-section (1) shall be
of 36000/- he will adjust 21600/- and the balance credit utilised only for payment of self-assessed output tax as
of Rs. 14400/- shall remain idle in his Electronic Credit per the return referred to in the said sub-section.
Ledger.
ANALYSIS:
REMARKS:
If we read the above three provisions together, we find
Now, goods sense has prevailed over the Government that the above provisions are not in consonance with
and it has inserted two entries, namely entry number (7) each other. According to section 2(82), the output tax
and (8) in Schedule III which decides whether a liability of an agent shall be included in the output tax
particular activity is to treated as a supply of goods or as liability of the Principal. The Principal cannot be made
a supply of service. The two entries inserted in liable for the output tax liability of an agent, supplying
Schedule III are as follows: goods or services on behalf of the Principal when the
law provides that the agent has to mandatorily obtain
“7. Supply of goods from a place in the non-taxable
territory to another place in the non-taxable territory registration as per the provisions of Section 24 (vii) of
without such goods entering into India. the CGST Act. And once the agent obtains registration,
all the provisions of the Act and the rules made there
8. (a) Supply of warehoused goods to any person under shall apply to him. It means that he shall have to
before clearance for home consumption;
make payment of his output tax liability either by utilizing
(b) Supply of goods by the consignee to any other ITC available to him or by cash.
person, by endorsement of documents of title to the
Section 2(82) read with Section 41(2) contradicts the
goods, after the goods have been dispatched from the
provisions of Section 16(1). Section 2(82) read with
port of origin located outside India but before clearance Section 41(2) provides that the tax credit available in
for home consumption.”
respect of supply of goods or services made to the
Hence, finally the issue of double taxation has been Principal can be utilized also against the output tax
resolved by the Government by amending the relevant liability of the agent, whereas Section 16(1) stipulates
provisions of the Act. that tax credit available in respect of supply of goods or
services to the agent only can be utilized against his
PROVISION:
output tax liability.
Section 2(82):
PROVISION:
“output tax” in relation to a taxable person, means the
tax chargeable under this Act on taxable supply of Section 2-

33 | Direct Taxes Professionals' Association - Journal www.dtpa.org