Important Keywords: Rule 6, Section 12.
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Rule 6 of IGST Rules, 2017.
The supply of services attributable to different States or Union territories, under sub section (11) of section 12 of the said Act, in the case of supply of services relating to a leased circuit where the leased circuit is installed in more than one State or Union territory and a consolidated amount is charged for supply of such services, shall be taken as being in each of the respective States or Union territories, and in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined in the following manner, namely:-
(a) The number of points in a circuit shall be determined in the following manner:
(i) in the case of a circuit between two points or places, the starting point or place of the circuit and the end point or place of the circuit will invariably constitute two points;
(ii) any intermediate point or place in the circuit will also constitute a point provided that the benefit of the leased circuit is also available at that intermediate point;
(b) the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the number of points lying in the State or Union territory.
Illustration 1 : A company T installs a leased circuit between the Delhi and Mumbai offices of a company C. The starting point of this circuit is in Delhi and the end point of the circuit is in Mumbai. Hence one point of this circuit is in Delhi and another in Maharashtra. The place of supply of this service is in the Union territory of Delhi and the State of Maharashtra. The service shall be deemed to have been provided in the ratio of 1:1 in the Union territory of Delhi and the State of Maharashtra, respectively.
Illustration 2 : A company T installs a leased circuit between the Chennai, Bengaluru and Mysuru offices of a company C. The starting point of this circuit is in Chennai and the end point of the circuit is in Mysuru. The circuit also connects Bengaluru. Hence one point of this circuit is in Tamil Nadu and two points in Karnataka. The place of supply of this service is in the States of Tamil Nadu and Karnataka. The service shall be deemed to have been provided in the ratio of 1:2 in the States of Tamil Nadu and Karnataka, respectively.
Illustration 3 : A company T installs a leased circuit between the Kolkata, Patna and Guwahati offices of a company C. There are 3 points in this circuit in Kolkata, Patna and Guwahati. One point each of this circuit is, therefore, in West Bengal, Bihar and Assam. The place of supply of this service is in the States of West Bengal, Bihar and Assam. The service shall be deemed to have been provided in the ratio of 1:1:1 in the States of West Bengal, Bihar and Assam, respectively.]
1. Inserted (w.e.f. 01.01.2019) by Notification No. 04/2018 Integrated Tax dated 31.12.2018.
Frequently Asked Questions
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What is Rule 6 of the Integrated Goods and Services Tax Rules, 2017?
Rule 6 of the Integrated Goods and Services Tax Rules, 2017 outlines the conditions and procedures for the utilization of input tax credit under GST, ensuring compliance and proper allocation of credits.
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How does Rule 6 affect input tax credit under GST?
Rule 6 specifies the manner in which input tax credit must be used, particularly in cases of mixed and exempt supplies, which directly impacts the amount of credit available for offsetting GST liabilities.
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What are the implications of non-compliance with Rule 6 in GST?
Non-compliance with Rule 6 can lead to penalties, disallowance of input tax credit, and an increased risk of audits by tax authorities, potentially affecting the financial health of the business.
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Can a taxpayer claim input tax credit for exempt supplies as per Rule 6?
No, Rule 6 restricts the claim of input tax credit for inputs or services used in the course of making exempt supplies, thereby requiring careful segregation of input usage.
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How is the proportionate input tax credit calculated under Rule 6?
The proportionate input tax credit under Rule 6 is calculated based on the ratio of taxable supplies to total supplies, ensuring that only the relevant portion of the credit is claimed.
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What documentation is required for compliance with Rule 6 under GST?
Taxpayers must maintain accurate records of input tax credits claimed, including purchase invoices and supply details, to demonstrate compliance with Rule 6 during audits.
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Are there any exemptions to the provisions of Rule 6 in GST?
Yes, certain exemptions may apply under Rule 6, such as specific categories of supplies or sectors, which can allow for different treatment of input tax credits.
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How can businesses ensure adherence to Rule 6 while filing GST returns?
Businesses should implement robust accounting systems, provide staff training, and conduct regular reviews to ensure accurate reporting and adherence to Rule 6 during GST return filings.
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What are the common mistakes to avoid regarding Rule 6 of GST?
Common mistakes include incorrectly claiming input tax credit for exempt supplies, failing to maintain proper documentation, and miscalculating the proportionate credit, all of which can lead to compliance issues.
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Why is it important to understand Rule 6 of the Integrated Goods and Services Tax Rules, 2017?
Understanding Rule 6 is crucial for effective GST compliance, maximizing input tax credit benefits, and avoiding potential legal issues or financial penalties associated with non-compliance.
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