itc reversal

[SHASHI MITTAL]

we have composite unit of cotton gining & oil mill unit ,we purchase raw cotton & pay gst on rcm basis & take itc on gst paid as Rcm,In gining unit two product emerge one is cotton bales & cotton seed, both are taxable but if we further process cotton seed ,2 products emerge one is cotton seed cake which is exempt & 2nd is cotton oil which is taxable ,so we need to reverse credit on cotton seed cake ,as per the turnover of cotton seed cake but how in gst 3b???

[Nandan Khambete]

In above illustration,Total ITC will be reversed in ratio of Turnover of cotton seed cake divided by Total Turnover, if specific Consumption records are not maintained.

If maintained, ITC will be reversed based on consumption of cotton for Making Cottong seed cake.

In GSTR 3B, full ITC to be claimed and later reversal u/s 42 will have to be shown.

[KASTURI SETHI]

I support the views of Sh. Nandan Khambete Ji. In addition to this, I also advise to consult CMA in this context.

[SHASHI MITTAL]

Thank you sir Nandan Khambete ji & kasturi sethi ji

[Ganeshan Kalyani]

In my view only eligible ITC can also be disclosed in the return instead showing total first and then reversing the ineligible.

[KASTURI SETHI]

Dear Sh.Ganeshan Kalyani Ji,

Raw material is one and two products emerge after ginning. Raw cotton contains seed also. So practically it is not possible to segregate both before ginning for the purpose of availment of ITC as suggested by you. So better option is to work out cost of production of both for computation of ITC involved in exempt product. For this purpose CMA is the right person to consult.

I hope you are satisfied and will agree with me.

Regards.

[Ganeshan Kalyani]

Yes, I agree with your views. Alternately, the proportion of ITC may be arrived by adopting previous financial year outward supply turnover. The turnover figure is ready is the accounts department of a company. I would like to have your views on this.

AI Summary

Input Tax Credit reversal: apportion ITC for exempt product by turnover or consumption; claim full then reverse in return.
ITC attributable to exempt seed cake produced by a composite ginning and oil mill must be apportioned and reversed; if consumption records are absent, apportionment is by exempt product turnover proportion, while recorded specific consumption allows reversal on actual consumption. In practice full ITC is claimed in GSTR 3B and the ineligible portion reversed subsequently; cost accounting or prior period turnover ratios are practical bases for allocation.