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2019 (10) TMI 786 - AAR - GSTInput tax credit - by-product Cotton Seed Oil Cake - taxable at 0% - Apportionment Input Tax Credit u/ s 17 of GST Act - treatment of claiming of Input Tax Credit on Raw Cotton purchased from agriculturist - reverse charge mechanism - treatment of claiming of Input Tax Credit on Plastic Bags (Bardana) which is only used for packing of the cotton seed oil cake - reversal of Input Tax Credit for the period of 2017-18, 2018-19 as per the Rule 42 of the CGST Rules, 2017. HELD THAT:- That the applicant is engaged in the business of manufacturing and production of Loose Cotton, Cotton Seeds, Cotton Seed Oil and by-product Cotton seed oil cake at Sangaria in the State of Rajasthan and has been granted a license for manufacture and production of same. The Loose Cotton, Cotton Seeds, Cotton Seed Oil are taxable at the rate of 5% under GST and Cotton seed oil cake is taxable at the nil rate of GST - the applicant is entitled to take credit of the ITC charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business. Thus, where any goods or services or both are used by the registered person partially for taxable supply including zero rated supply and partially for the exempted supply then in that case the claim of ITC shall be restricted to the extent of taxable supply including zero rated supply. Reversal of input tax credit - HELD THAT:- In view of the provisions of Section 17 (2) of GST Act, 2017 read with rule 42 of GST Rules, 2017 as stated above, the amount of credit shall be restricted to so much of the input tax is attributable to the said taxable supplies including zero rated supplies. The applicant has to reverse the amount of credit used in the manufacture and sell of the product which attracts nil rate or exempted from GST. Raw cotton is purchased by the applicant from agriculturist - HELD THAT:- The raw cotton is purchased by the applicant from agriculturist and tax @ 5% is paid under Reverse Charge Mechanism by him. They are eligible for claiming of ITC as per Section 16, however, the credit is to be restricted to the extent of input tax attributable to the taxable supplies including zero rated and has to reverse the amount of input tax attributable to the exempted supply i.e. Cotton seed oil cake in terms of Section 17 (2) of GST Act, 2017. Plastic bags (Bardana) which is used only for packing of the Cotton Seed oil Cake - HELD THAT:- The Plastic bags (Bardana) which is used only for packing of the Cotton Seed oil Cake is an integral part of the Cotton Seed oil Cake and Cotton Seed oil Cake cannot be sold without plastic bags. Therefore, though they are entitled to take credit of input tax suffered on Bardana but will have to reverse the same as per provisions of Section 16 and 17 of GST Act, 2017. The issue i.e. “whether the applicant has to reverse the Input Tax Credit for the period of 2017-18, 2018-19 as per the Rule 42 of the CGST Rules, 2017?” is not covered under Section 95(a) of GST Act therefore no ruling is to be given on this issue.
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