Inter-State Machinery Supply, ITC Timing, Reverse Charge and GST Returns
Alpha Traders, a registered supplier in Maharashtra, sold machinery to Beta Ltd, a registered recipient in Karnataka, for ₹50,00,000 plus IGST at 18%. The invoice was dated 25 March 2025. The machinery was delivered to Beta's factory in Karnataka on 2 April 2025, and payment was received by Alpha on 10 April 2025. Beta also received legal services from an advocate in Karnataka; the invoice dated 30 March 2025 was for ₹2,00,000 and payment was made on 15 April 2025. Beta used the legal services for its business. Beta also paid ₹1,00,000 to a goods transport agency that had not opted for forward charge. Beta wants to claim input tax credit of the IGST on machinery in its March 2025 return because the invoice is dated March. Advise on place and time of supply, tax liability, ITC timing, reverse charge and return due dates.
1. Determine the place of supply and time of supply for the machinery, and state the tax and return in which Alpha must discharge it.
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The supply involves movement of goods from Maharashtra to Karnataka. Under section 10 of the IGST Act, the place of supply is the location where the goods are delivered to the recipient, i.e. Karnataka. Since the supplier and recipient are in different States, it is an inter-State supply and IGST applies. IGST = 18% of ₹50,00,000 = ₹9,00,000.
Under section 12 of the CGST Act, the time of supply of goods is the earlier of the date of issue of invoice or the date of receipt of payment. The invoice date is 25 March 2025 and payment is 10 April 2025, so the time of supply is 25 March 2025. Alpha must include the supply in its GSTR-1 for March 2025 (due 11 April 2025) and discharge the IGST in GSTR-3B for March 2025 by 20 April 2025.
2. Can Beta claim ITC of the IGST on machinery in March 2025? Explain the conditions and the correct month.
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No. Under section 16(2)(b), ITC is available only when the recipient has received the goods. Although the invoice is dated 25 March 2025, the machinery was delivered on 2 April 2025. Beta cannot claim ITC in the March 2025 return merely because the invoice was issued in March.
The ITC can be claimed in the April 2025 return, when the goods are received, provided the invoice is reflected in GSTR-2B, the tax has been paid by Alpha, Beta files the return and other section 16 conditions are satisfied. Claiming it in March would be premature and could lead to reversal and interest.
3. Explain the reverse charge implications for the legal services and the GTA services, including time of supply and ITC.
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Legal services by advocate. Services supplied by an advocate are covered by reverse charge. Beta must pay GST at 18% on ₹2,00,000 = ₹36,000 under RCM. Under section 13(3), the time of supply in RCM cases is the earlier of the date of receipt of invoice or the date of payment. The invoice is dated 30 March 2025 and payment is 15 April 2025, so the time of supply is 30 March 2025. Beta can claim ITC of the ₹36,000 if the services are used for business.
GTA services. Since the GTA has not opted for forward charge, Beta must pay GST under reverse charge at the applicable rate (5% for GTA without ITC). On ₹1,00,000 the tax is ₹5,000. The time of supply is the earlier of invoice or payment. Beta can claim ITC if the freight is used for business, subject to the normal ITC conditions.