2018 (7) TMI 881 - AAR - GST

Seed Packaging Materials: Limited Input Tax Credit Permissible for Taxable Inter-Branch Transfers Under Section 17(2)

The SC ruled on ITC claims for packaging materials in seed supply. The court held that ITC cannot be claimed on packaging materials used for exempted seed ... Input Tax Credit (ITC) - seeking credit packaging material which is to be used in exempted supply, till they are into their stock - ITC while transferring goods between their 'own branches - multiple taxes on transfer of goods to other branches of the applicant Held that:- As per provisions of section 17(2) of CGGST Act, 2017 any registered recipient can claim ITC to the extent of taxable stock or taxable outward supply shown in their returns. The registered recipient cannot claim ITC on the amount of taxable supply component included in the total amount of exempted supply. The amount of unclaimed ITC shall also be reversed in the electronic ledger of the same month - If the applicant supplies seeds (exempted item) in packaged form using such packing materials (taxable item), to its own branches in other States, then no ITC could be claimed on the packaging material used for the said exempted supply of seeds. Whereas, if the applicant supplies only packing material to own branches in other States, then the ITC involved in purchase of such packing material could be availed as per section 17(2) of CGGST Act, 2017. Ruling:- The applicant is not entitled to ITC on the packing material used for packaging seeds, while making such exempted supply of seeds to their own branches and to other purchasers. They are however, entitled for ITC (of the tax involved in the purchase of such packing material) on the exclusive taxable supply of such packing material made to their own branches in other States, in terms of section 17(2) of Chhattisgarh Goods and Service Tax, Act 2017. Issues involved:1. Whether Input Tax Credit (ITC) can be claimed on packaging material used for exempted supplies and inter-branch transfers.2. Applicability of section 17(2) of CGGST Act, 2017 on ITC claims for different types of supplies made by the applicant.Detailed Analysis:1. The applicant, a company involved in supplying seeds in packaged form using packaging materials, sought an advance ruling on claiming Input Tax Credit (ITC) on packaging material until it is in stock and on ITC for transferring goods between their own branches. The applicant highlighted concerns about paying GST for internal transfers between branches, leading to multiple taxation on the same goods, which contradicts GST principles.2. Facts of the case reveal that the applicant deals with exempted seeds but procures taxable packaging materials. They transfer taxable inputs like packaging materials between branches and processing units. The applicant's contention was to retain ITC on purchased packaging materials until they are in stock and to address the GST implications on inter-branch transfers.3. During the personal hearing, the applicant reiterated their contentions, emphasizing the need for ITC on packaging materials and the challenges posed by GST on inter-branch transfers. The principles of natural justice were adhered to by providing a hearing to the applicant.4. The legal analysis focused on the provisions of the CGGST Act, 2017 related to composite supplies, input tax credit, and tax liability determination for different types of supplies. Section 17(2) of the Act was particularly highlighted, indicating the conditions for claiming ITC based on the nature of supplies made by the applicant.5. The ruling clarified that the applicant cannot claim ITC on packaging material used for exempted seed supplies to their branches or other purchasers. However, they are eligible for ITC on the tax involved in purchasing packaging material for exclusive taxable supplies to their branches in other states, in accordance with section 17(2) of the Chhattisgarh Goods and Service Tax Act, 2017.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the legal interpretation applied to address the applicant's concerns regarding Input Tax Credit and GST implications on different types of supplies made by the company.