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With reference to the Advance Ruling In re Aristo Bullion Pvt Ltd (GST AAR Gujarat), as ruled by the Gujarat Authority for Advance Ruling, the applicant cannot use the input tax credit balance available in the Electronic Credit ledger, from the purchase of inputs used for the outward supply of bullions, against the outward supply of castor oil seed, another business vertical of the same applicant with same registration number, we shall discuss the important points as per the ruling.

In the subject case, the applicant is making outward supply of bullions for which he procures inputs to be used in the manufacturing process in order to make the bullions salable. Since the bullion is hedged on MCX and the price fluctuations, the applicant has accumulated excess credit in electronic Credit ledger.

The applicant, also intends to procure castor oil seeds directly from Agriculturists, since the supply by the Agriculturists is exempted from the tax, and also the ‘castor oil seeds’ is not covered under Section 9(4) of the CGST Act, no question of availability of input tax credit but the outward supply of castor oil seeds by the applicant is taxable as per the Section 9(1) of the CGST Act.

The applicant wants to know if they can utilize the excess credit available in the electronic Credit ledger in respect of bullions against the outward liability of castor oil seeds.

Section 16 of the CGST Act, prescribes the eligibility and conditions for taking input tax credit; accordingly, every registered person is entitled to take credit of input tax charged on the inward supplies received by him, subject to a condition that the inputs or input services should be used in the course or furtherance of his business.

According to the authority, inputs such as dores or gold, silver, etc procured by the applicant are used in the manufacture of their final product of bullion and the applicant is eligible to take and utilize the input tax credit of such inputs against the outward liability of bullion. Since the applicant didn’t prove the nexus between the inputs with the castor oil seeds and also there cannot be any connection between inputs of gold and castor oil seeds, the authority concluded that the applicant is not eligible to utilize the input tax credit available in the electronic credit ledger against discharging the outward liability of castor oil seeds.

Understanding: As per the ruling, ITC is available only when it is used or intended to be used in the course or furtherance of business. Business owners having multiple business verticals need to be vigilance in utilization of ITC. While discharging the outward liability, they should make sure that ITC is utlised only when the inputs or input services are used for making related outward supply.


Disclaimer: This article is only for the purpose of understanding the provisions of the Act, the author bears no responsibility on decisions taken by the readers whatsoever. E&OE.

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  1. Mukesh Kuriyal says:

    Yes it is correct.For eg taxpayer is having rental income as well as works contract he cannot utilize ITC of works contract in Rent while paying tax.As cement is not linked with Rent so he has pay cash for that.

  2. Lemesh Kumar Goel says:

    Hello Uday,
    In the first paragraph, it is stated as Electronic cash ledger, shouldn’t it be electronic credit ledger.

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June 2024