Logic of a Common ITC Pool Can Distinct Business Activities Under One GST Registration Cross-Utilize Credit
One of the less examined questions under GST is whether a person carrying on more than one business activity under the same GST registration can use input tax credit generated in one activity to discharge output tax arising from another. The issue becomes sharper when the two activities are not merely different product lines within the same trade, but commercially distinct businesses altogether. Must the inward supply that generated the credit bear a direct nexus with the outward supply on which the tax is later paid, or does credit, once validly availed, become part of a common pool at the level of the registered person?
That question arose squarely in Aristo Bullion Pvt. Ltd. before the Gujarat AAR. The applicant was engaged in the bullion business and had accumulated input tax credit on inward supplies such as gold and silver dore. It also proposed to trade in castor oil seeds purchased from agriculturists and then supplied onward on payment of GST. The legal issue was straightforward: could credit accumulated from bullion-related inward supplies be used to discharge GST liability on castor oil seed trading?
The Gujarat AAR’s Nexus Approach
The AAR answered that question in the negative. Relying on section 16(1) of the CGST Act, it reasoned that credit is available only where the inward supplies are used or intended to be used in the course or furtherance of business, and that this required a nexus between the inward supplies on which credit was taken and the outward supplies against which that credit was to be utilised. Since bullion inputs had no connection with castor oil seed trading, the AAR held that the credit could not be used in that manner.
The AAAR’s Reversal: Separating Eligibility from Utilization
That reading, however, was reversed in the Gujarat AAAR’s decision in Aristo Bullion. The appellate authority held that output tax on castor oil seeds could be paid through credit validly taken on gold and silver dore bars, even though the inputs and outputs belonged to entirely different trades. Its reasoning was both simple and significant: once ITC is validly availed, it enters the electronic credit ledger of the registered person, and that ledger is not maintained commodity-wise. The law does not require the taxpayer to maintain a product-by-product chain at the stage of utilization.
The AAAR’s approach is preferable because it is more faithful to the structure of the GST statute. The key lies in distinguishing between eligibility and utilization. Section 16 deals with the former. It asks whether the registered person is entitled to take credit at all. Section 49 deals with the latter. It provides that the amount available in the electronic credit ledger may be used for payment of output tax, subject to the conditions and restrictions prescribed. Read together, these provisions suggest a two-step scheme: the first inquiry is whether the credit has been lawfully availed; the second is how that lawfully available credit may be deployed.
The difficulty with the AAR’s reasoning is that it collapses these two stages into one. To say that credit can be taken only when the inward supply is used in the course or furtherance of business is not the same thing as saying that each unit of credit must forever remain tied to the exact outward supply, product, or internal business stream from which it arose.
Can Commercially Distinct Businesses Under One GSTIN Share the Same ITC Pool?
Suppose one registered person carries on two taxable but commercially unrelated activities under the same GSTIN. Can it use credit earned in one activity to pay output tax arising from the other? After Aristo Bullion, the better answer is yes, in principle. The relevant legal unit under the GST framework is the registered person, not the internal similarity between its different businesses. So long as the credit has been validly availed, is not hit by section 17, and remains available in the electronic credit ledger, the mere fact that the outward liability arises from a different line of trade should not by itself disentitle utilization.
This brings one to the practical question businesses actually face. Bullion trading and castor oil seed trading are commercially distinct. The appellate ruling therefore cannot be reduced to a narrow proposition about closely connected product categories. Its real significance lies in rejecting the assumption that credit must be matched to the same business stream at the stage of utilization.
Why the Common-Pool Reading Makes Better Functional Sense
There is also a strong functional reason to prefer that interpretation. If GST were read as requiring business-by-business or commodity-by-commodity tracing after valid availment, the electronic credit ledger would lose much of its value as a common credit pool. A diversified enterprise operating under one GSTIN would be pushed into artificial internal matching exercises that the statute itself does not clearly demand. That would introduce complexity without any obvious textual basis. The AAAR’s recognition that the ledger is not maintained commodity-wise is therefore not merely an administrative detail; it reflects the operational logic of the credit system itself.
The Limits of Aristo Bullion
At the same time, Aristo Bullion should not be overstated. It does not mean that every internal allocation question under GST can be resolved by pointing to one common ledger. The real limit lies in registration structure. Under section 25, once separate registrations exist, each registration is treated as a distinct person for the purposes of the Act. That distinction is crucial. A case involving multiple businesses under one GSTIN is not the same as a case involving multiple registrations of the same enterprise. In the latter situation, the law itself has fractured the enterprise into separate taxable persons, and the argument from common pooling becomes much weaker.
That is why recent disputes involving inter-branch transactions and distinct persons, such as KEI Industries Ltd. v. Union of India, belong to a different legal category. They are relevant because they show how much turns on the statutory idea of the registered person, but they do not undermine the central insight of Aristo Bullion: where there is only one registration, GST does not automatically create invisible walls between different taxable activities carried on by that registered person.
A further caution is that Aristo Bullion remains an advance ruling decision. Its formal binding force is limited under the statutory scheme. But its analytical value remains considerable because it addresses a question on which there is very little direct authority: whether GST law demands sameness between the business that generated the credit and the business against which that credit is later used. On that issue, the AAAR’s answer is the better one.
Another important point flows from this. Aristo Bullion is not just a decision about credit utilization, it also shows the legal impact of GST registration structure. As long as a taxpayer operates under a single GST registration, the law treats it as one registered person with a single electronic credit ledger. However, once separate registrations are obtained, section 25 breaks that legal unity by treating each registration as a distinct person. Seen this way, the case also serves as a reminder that choosing between a single registration and multiple registrations is not merely an administrative matter. It has a direct bearing on how freely credit can move within the business.
Conclusion
The broader lesson is that the dispute is often framed incorrectly. The real question is not whether the businesses are identical, similar, or commercially linked. The real question is whether the statute treats them as belonging to the same registered person, and whether any express restriction prevents use of the credit once it is validly in the ledger. If the answer to the first is yes and the answer to the second is no, then there is no convincing reason to prohibit utilization merely because the outward liability arises from a different business activity.
Aristo Bullion, then, deserves attention not because it concerns bullion and castor oil seeds, but because it clarifies a structural point about the GST regime. Input tax credit is not ordinarily organized around internal notions of business similarity. It is organized around the registered person, the electronic credit ledger, and the express statutory limits imposed by the Act. On that footing, different taxable businesses operating under a single GST registration should, as a matter of principle, be able to draw upon the same pool of credit unless the statute clearly says otherwise.
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