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UTILIZATION OF INPUT TAX CREDIT
359 – GST AAR BRIEFING BY GSTCORNOR®
M/s Aristo Bullion Pvt Ltd
Order Date 27.01.2021 Based On: Input Tax Credit Facts of the Case:
Nature of Business
The applicant states that he plans to engage in two types of business as under:
(i) To import the bullions (HSN 7IO817106) on payment of IGST (3%at present). The Bullion so received will be refined and thereafter the same will be sold in to domestic market to various buyers on payment of GST at applicable rates (3% at present). Further we may also domestically trade in bullion to take the advantage of price fluctuations.
(ii) We intend to procure Castor oil seeds (HSN l207) from agriculturist (not liable to be registered u/s 23 of CGST/SGST Act, 2Ol7), and will be selling in the Domestic Market to the buyer [Trading Activities]. No ITC will be available on procurement of Castor oil seeds as the same will be procured from the agriculturist. Whereas the sale will attract GST @ 5% on sale.
Can the applicant use Input Tax Credit Balance available in the Electronic Credit Ledger legimately earned on the inputs/raw-materials/inward supplies (meant for outward supply of Bullions) towards the GST liability on ‘Castor Oil Seed’ which were procured from Agriculturists and subsequently meant for onward supply?
AAR Discussions & Findings:
The core issue is that the applicant wants to trade in Castor oil seeds on which the GST liability is 5% and wants to utilise the input tax credit (availed on inputs such as gold dores, silver dores etc.) available with him in his electronic credit ledger for the payment of the said GST. However, AAR find that, for the applicant, to be eligible to avail the aforementioned input tax credit for the payment of the GST leviable on the Castor oil seeds which they intend to supply domestically or to export it, the applicant has to first prove the nexus or connection between the aforementioned inputs and the castor oil seeds which he intends to supply, in the terms of Section 16(1) of the CGST Act, 2017 as discussed above i.e. he has to prove as to how the gold dores or silver dores are used or intended to be used in the course or furtherance of his business of supply of Castor oil seeds.
In this regard, AAR find that firstly, the applicant has not submitted any document/literature etc. in respect of how they wish or intend to carry out the business of supply of castor oil seeds. Secondly, they have not provided/submitted any proof in respect of the input-final product nexus/connection in respect of the inputs i.e. gold and silver dores etc. vis-a-vis Castor oil seeds nor provided any such document/literature in respect of how the inputs i.e. gold dores or silver dores are used or intended to be used in the course or furtherance of their business of supply of Castor oil seeds. Even otherwise, on a plain comparison of the provisions of Section 16(1) of the CGST Act, 2017 with the issue in hand, it can very easily be derived that there is no nexus/connection whatsoever, of the inputs i.e. gold dores or silver dores with the business of supply of Castor oil seeds by the applicant. It can therefore, be seen that the even the basic conditions envisaged in the provisions of Section
UTILIZATION OF INPUT TAX CREDIT
359 – GST AAR BRIEFING
16(1) have not been fulfilled in the instant case and we can therefore, undoubtedly conclude that the aforementioned inputs are not used or intended to be used in the course or furtherance of the business of supply of Castor oil seeds.
In view of the facts mentioned above, and the non-submission of the aforementioned document/literature as mentioned above, by the applicant, we conclude that the applicant is not eligible to utilise the input credit available in their Electronic Credit Ledger (earned on the inputs/raw-materials/inward supplies meant for outward supply of Bullions) for payment of GST liability on supply of Castor oil seeds.
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