ITC on AMC Charges, ITC on Bill of Entry & ITC on Wrong HSN code in Invoice

Q1. ABC Pvt. Ltd. gets its manufacturing unit established in an industrial park. As per the lease deed, the company has to pay annual maintenance charges on the basis of per square meter area of the leased factory. Further, the rent comprises of rent for the factory as well as charges for maintenance and development of such an industrial park.

Whether ITC can be availed on annual maintenance charges paid by the company to the industrial park?

Ans. Section 16(1) provides that every registered person, subject to prescribed conditions and restrictions, is entitled to take credit of input tax charged on any supply of goods or services or both used or intended to be used in the course or furtherance of his business.

The consideration paid under the lease deed is classified as annual lease rent as well as the annual maintenance charges for maintenance and development of the industrial area. Though the maintenance charges include the charges for the maintenance of the industrial area beyond the borders of the factory, they are very much the part of the annual lease rental in terms of the following rationale:

1. Maintenance is one of the elements of the lease document.
2. Maintenance is calculated at the rate per square meter of the leased factory.
3. Rent and maintenance are naturally bundled and supplied in conjunction with each other in the ordinary course of business.

The availability of a suitable industrial plot is an essential requirement for manufacturing activity. Hence, ITC on the annual maintenance charges (which is a part of the rent) can be availed.

Q2. Whether GST paid voluntarily in TR-6 challan in relation to import bill of entry is available as ITC?

Ans. Section 16(2)(a) mandates that to avail ITC, one must have possession of tax invoice/debit note issued by supplier or any other document as may be prescribed. Further, rule 36 talks about “Documentary requirements and conditions for claiming input tax credit”. Clause (d) of sub-rule (1) of rule 36 states: “a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports”.

Therefore, if IGST is paid voluntarily in TR-6 challan in relation to imports, then credit will be available as per clause (a) of section 16(2).

Q3. If the vendor has mentioned wrong HSN on the invoice and the recipient has availed ITC on that invoice, can ITC be denied to the recipient?

Ans. As per section 16(1), in order to avail ITC, a registered person has to satisfy the conditions prescribed in section 16(2) read with rule 36. Specifically, rule 36(2) provides that ITC shall be availed by the recipient only if all applicable particulars as specified in the provisions of Chapter VI of the CGST Rules, 2017 are contained in tax invoice.

However, the proviso to rule 36(2) gives a relaxation stating that ITC may be availed by the recipient even if the tax invoice does not contain all applicable particulars, but contains the following details:

• Amount of tax charged.
• Description of goods or services
• Total value of supply of goods or services or both
• GSTIN of the supplier or recipien
• Place of supply in case of inter-State supply

Thus, HSN code is not a mandatory requirement to avail ITC, going by the proviso to rule 36 (2). Thus, wrong mentioning of HSN code does not deprive the recipient from availing ITC.