Gst not deposited by vendor, how to claim

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Kamal Pal

Dy. Mgr. Accounts

128 Points Posted on 23 March 2018

Dear All, This is query which can be understand only with the example below, kindly have a look and reply. X company have taken a premise on rent from landlord Y, Z is the maintenance company of building who bills Y the landlord for the maintenance charges but X pays the maintenance charge as per rent agreement, now when X checks his GST input he finds Z have not deposited any tax on behalf of X and deposited tax on behalf of Y because the billing are done directly to Y not X. The problem is X do not want to enter in the agreement of maintenance with Z because it demands a six month security deposit which impacts the X's working capital very bad. My question here is if X pays all dues with tax to Z and billing and tax deposit are being done in favor of Y will the X be eligible to claim the input tax in this condition? Or is there any alternative or solution to this issue.

Replies (4)

Kapil Pathak

46 Points Posted on 23 March 2018

If invoice is raised to Y then X won't be eligible to claim ITC since as per the invoice services are provided to Y and not X.
The solution would be to ask Y to raise a fresh invoice to X and Y would be eligible to claim ITC in respect of bill issued by Z and X would claim the itc on invoice issued by Y
Another solution could be that Y may act as a pure agent and can bill maintenance charges to X along with the charges of rent.
As per the recent judgement of SC reimbursements are not taxable so conditions of being a pure agent are irrelevant now.

Kamal Pal

Dy. Mgr. Accounts

128 Points Posted on 23 March 2018

Thanks for replying Kapil, Just for further confirmation - If Y bills to X,

1. say it's 10000 maintenance + 18% Gst = 11800/- total invoice value then Y should bill 11800/- or 11800+Gst.

2. If X is paying the rental charges to Y every month and deduction of 10% TDS applies on rent, then while paying maintenance charges X should deduct 2% under 194C or 10% on 194I or 194J, which type of deduction will apply here.

I am asking this query on behalf of X and Y the landlord have raised this concern.

Kapil Pathak

46 Points Posted on 23 March 2018

1. If Y is taking ITC of 1800, then Y would raise an invoice of 10,000 + profit margin if any . In case Y is not taking any ITC then Y would raise an invoice of 11,800 and GST won't be applicable on 11,800 since it is just a reimbursement provided Y doesn't have any profit margin on maintenace charges. However to avoid any litigation Y should take ITC of maintenace charges and charge GST on maintenance charges received from X.

2. TDS is not deductible on reimbursements. Since Y does not have any profit margin so X won't deduct TDS on maintenance charges but Y would deduct under 194C before making payment to Z. And if there is profit margin then on maintenance charges , TDS would be duducted under section 194 C on maintenance charges.