REVERSAL OF ITC

[Deepak Garg]

SIR,

IN THE CASE OF RICE SHELLER I AM DOING JOB WORK OF PADDY MILLING AND RECEIVED MILLING CHAGES @10/- PER QTL.AND PAID GST ON MILLING CHARGES.APART FROM MILLING CHARGES I RETAIN HUSK AND RICE BRAN AS PER AGREEMENT FREE OF COST. I AM PURCHASING MACHINERY PARTS FOR JOB WORK.PLEASE REPLY MY FOLLOWING QUESTIONS.

1. WHEATHER I HAVE TO PAY TAX ON JOB WORK CHARGES ON RS.10/-ONLY OR BY ADDING VALUE OF GOODS RETAINED BY ME ESPECIALLY WHEN I HAVE ALREADY PAID TAX ON RICE BRAN.

2. CAN I CLAIM FULL ITC ON MACHINERY PARTS WITHOUT REVERSAL.

3 CAN I CLAIM ITC OF CAPITAL GOODS IN THE CASE OF NEW RICE SHELLER

4 TOTAL SUPPLY OF GOODS SAY 3400000/-WHICH INCLUDE RB-TAXABLE 2000000/- +HUSK 1000000+ MILLING CHARGES 200000+ OTHER TAXABLE SERVICES 200000/-.AND PAID TAX ON PURCHASE OF MACHINERY PARTS RS.30000/- KINDLY CALCULATE TAX EFFECT

[KASTURI SETHI]

Query-wise reply is given below:-

1. You will have to add the value of husk and rice bran. There is no free lunch. You can not execute contract in violation of CGST Act. Otherwise you will invite SCN.

2. Yes you can. Reduction of rate to 5% from 18% (Notification 31/17-C.T.(Rate) dated 13.10.17 does not mean ITC is not allowed. Notification reducing rate does not impose any restriction to this extent.

3.Yes.

4. Linked with above reply. Only calculation is to be done.

This is my interpretation.

Also read Circular No. 19/19/2017-GST, dated 20-11-2017 along with relevant notifications mentioned in the circular.

 

[VENKATARAMANAN NATARAJAN]

Sir,

For Q.1 the value of Husk and rice bran is to be added for the consideration need not only be in money and even non monetary consideration is to be valued in terms of money and subject to tax.

For Q2. You are entitled to Input tax credit on the capital goods that is on Machinery.

For Q3 There is close proximity between the goods processed and the machinery Rice Sheller. Therefore You are entitled to ITC on Rice Sheller also

For Q 4 It is a matter of calculation of the tax. Any way my reply may be viewed not as a final one but in the light of the observations of the other reply this may or may not be taken.

AI Summary

Non-monetary consideration taxable: retainment of by-product attracts GST and requires valuation; ITC on machinery allowed. Retention of by products by a job worker is non monetary consideration that must be valued and added to taxable consideration for the job work supply; husk and rice bran retained cannot be treated as free and are taxable. Input tax credit is available on machinery parts and on capital goods (including a new rice sheller); a reduction in outward rate does not automatically deny ITC. Calculation of tax impact requires adding the value of retained by products to the consideration and applying the relevant tax rates and available ITC.