I am in Haryana and want to purchase Cotton Seed from Andha Prdesh (IGST 5%). I want to process same in my oil mill as Cotton Seed oil (qty 8%) and Cotton Seed Cake (qty 92%). As Cotton Seed oil is in segment of 5% GST and Cotton Cake is in exempt category. Than is there any fixed percentage of input tax credit of my purchases of cotton seed?
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.
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.
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)
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