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CA Final · Indirect Tax Laws · Input Tax Credit

Narmada Infra Ltd has an ISD registration in Bhopal. Its sister unit in Bhopal, with the same PAN and State code, received a common input service on which tax is payable by it under reverse charge, and the service is attributable to several distinct persons. Under Rule 39(1A), which statement is correct?

The registered person with the same PAN and State code as the ISD may issue an invoice, credit or debit note under rule 54(1A) to transfer the credit on such reverse charge common input services to the ISD, and the ISD distributes it as per sub-rule (1).

  1. AThe registered person may issue an invoice, credit or debit note under rule 54(1A) to transfer the credit of such common input services to the ISD, which then distributes it under sub-rule (1)Correct
  2. BThe ISD cannot distribute credit on reverse charge services in any case
  3. CThe registered person must distribute the credit directly to recipients without involving the ISD
  4. DThe credit lapses unless the ISD has a different PAN from the registered person

Explanation

Sub-rule (1A) lets a registered person with the same PAN and State code as the ISD issue an invoice, credit or debit note as per rule 54(1A) to transfer the credit of common input services, subject to tax under section 9(3) or (4), to the ISD. That credit is then distributed by the ISD as provided in sub-rule (1). The other options contradict this.

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