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ITC restriction

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venkateswara reddy gudemupati

33 Points Posted on 14 November 2020

1. Tax payer dealing in pesticides (taxable) and also Agricultural seeds (exempted). Maintaining separate purchase and sale ledgers.
2. Filing GSTR-3B return reporting sale turnovers of pesticides and agricultural seeds and adjusting ITC accrued on purchase of Pesticides against output tax payable on sale of pesticides.
3. In this scenario, whether ITC restriction arises or not?

Replies (8)

Quick Summary

This discussion explores Input Tax Credit (ITC) restrictions for businesses trading both taxable pesticides and exempt agricultural seeds. While ITC on pesticides is generally claimable, common expenses used for both taxable and exempt supplies require proportionate reversal according to CGST Act rules. Even without capital goods, common services like rent or advertising may be subject to ITC restrictions based on turnover.

JATINDER KUMAR

Accountant

3662 Points Posted on 14 November 2020

Yes, you can not claim full ITC

Shivam RC

Student

23693 Points Posted on 14 November 2020

Yes you can claim ITC but incase of Capital Goods which are being used both for supplying Taxable Goods ( Pesticides ) as well as Exempted Goods ( Agricultural Seeds ), you have to reverse proportionate ITC and follow the Provisions of Section 17 and 18 of the CGST Act 2017.

venkateswara reddy gudemupati

33 Points Posted on 14 November 2020

He is a trader,i.e purchase and sale only. No involvement of capital goods.

JATINDER KUMAR

Accountant

3662 Points Posted on 14 November 2020

You can not claim full ITC if you use common services for trading of goods

For example if ITC availed by you on following services

Rent

Telephone expenses

Advertisement expenses

Professional and Legal Fees

etc.

Ranga raj

still studying

122 Points Posted on 14 November 2020

Sir, The ITC relating to the expenses incurred for the sale of pesticides can be claimed but common expenditures incurred for both exempt sales and taxable sales like purchase of stationary, audit fee should be claimed proportionately on turnover basis. For detailed clarification read rule 42 & 43 of CGST Act and reversal of common credit.