Input tax in taxable raw and exempt production

Yes...Ur purchase of raw material (cotton seed) has 5% IGST...which is used for furtherance of Ur business...thus the entire 5% of the raw material is available as input tax credit...as Ur sales is exempted...u can get those input credit by way of refund.

I think your case falls under section 17(2) of CGST Act. Therefore, you are entitled to ITC only of tax charged on 8% quantity of seeds. The remaining quantity is being used in supply of exempted goods, therefore, is not eligible for ITC.

Ramesh sir, your reply is amusing. Could you please elaborate how only 8 % will be eligible. ? Because the seller will upload complete invoice and we get full ITC viab gstr2. the oil output can be 9-11 also..

There is nothing amusing in my reply Harsh. It is a case where common inputs (cotton seeds) are being purchased and used for supply of taxable (cotton seed oil) and exempted goods (cotton seed cake). Therefore, the tax suffered on the portion of the inward supply of cotton seed which is used in the manufacture  and supply of exempted goods, is not eligible for ITC. This is a restriction imposed under Section 17(2). Rule 42 of the CGST Rules provides for the mechanism to compute the amount of ITC to be attributed for business purposes.

So in the following case what will be eligible ITC..? - Purchase - 1quintal x 1800/- = 1800 Tax @ 5% = 90 Rs. GST. Sales - Oil 8% - 8kg * 70/- = 560/- Tax gst @ 5% - 28/- payable Rest 92% tax-free at 1500/- quintal. So as per calculation, Tax charged on 8% of 1quintal Seeds, = 90*0.08 =7.2Rs. I will be eligible for 7.2Rs ITC Only..?? I have to pay 28-7.2 = 20.8/- GST Again as sales..????

I COMPLETELY AGREE WITH YOU SIR, 

I THINK IN THIS CASE, I CAN COVER 92% OF ITC IN " INPUT TAX ATTRIBUTABLE TO INPUTS USED EXCLUSIVELY FOR EFFECTING EXEMPT SUPPLIES" AS PER  RULE 42

AND BALANCE 8% IN" INPUT TAX ATTRIBUTABLE TO INPUTS USED EXCLUSIVELY FOR EFFECTING TAXABLE SUPPLIES" AS PER RULE 42

I CAME TO THIS CONCLUSION ONLY BECAUSE  IF I COVER THIS CASE IN "COMMON CREDIT" THEN IN CASE IF I HAD ONLY EXEMPT SUPPLIES DURING A PARTICULAR TAX PERIOD(SAY OF COTTON SEED CAKE ONLY), THEN AS PER RULE 44, MY WHOLE ITC SHALL LAPSE= COMMON CREDIT*(EXEMPT SUPPLY/AGGREGATE TURNOVER DURING TAX PERIOD)