Issues : Petrol Pump Dealers

[SHYAM PATHAK]

Dear Sir,

Petroleum retailers (Petrol Pump Operators) are selling Diesel, Petrol and Lubricants. All dealers are GST registered dealers. Dealers are paying LFR (Rent for using Licence, Machinery, Land etc) to Oil Marketing Companies (OMC). OMCs are charging SGST and CGST form dealers by raising TAX Invoices to dealers. Dealers are also selling lubricants (18% GST slab)

May dealer accumulate ITC paid on LFR after adjusting GST payable (lubricants), considering that components of lubricant sales is very nominal ?

Some Tax experts are saying that accumulation of ITC become very high and NOT possible to adjust in Current FY or something like that. Is this Statement has some Legal ground ?

[Rajagopalan Ranganathan]

Sir,

If ITC after utilization still remains in your credit ledger, then there is no provision for lapsing such accumulated credit under the CGST Act. It will lapse only when the business is closed down. At the same time, you cannot claim refund of the same except when supply is made for export without payment of tax under a letter of undertaking/bond or the rate of tax on inward supply is higher than the tax on outward supply.

[KASTURI SETHI]

Sooner or later petroleum products i.e Petroleum crude, high spirit diesel, motor spirit (petrol), natural gas and aviation turbine fuel will be brought under GST network. Hence accumulated ITC in Electronic Credit Ledger will not go waste.

[ABHISHEK TRIPATHI]

Dear Sir,

You may accumulate but cannot utilize (all) or get refund on the same. Wait for petrol/diesel to come under the purview of GST.

[Shilpi Jain]

Pls note that credit reversal maybe required under rule 42 since the entire turnover of the dealer is not taxable. After this reversal no accumulation may exist.

[Ganeshan Kalyani]

I agree with the views of all experts. I agree with Shilpi Mam's view in the sense that Input is for entire business which has non-gst + gst turnover. So, ITC eligible to be worked out based on turnover ratio i.e. taxable turnover divided by total turnover (gst+non-gst turnover) will give taxable ratio , multiply total ITC with the ratio so arrived to arrive at eligible ITC. This excercise will give clear scenario if really ITC is getting accumulated or not.

[navnath padwal]

but petrol is exempt supply , it is non gst supply .

as per section 17 (5) itc on exempt supply need to be reversed. section as follow :

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

1[Explanation.-For the purposes of this sub-section, the expression ‘‘value of exempt supply’’ shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.]

(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;

[KASTURI SETHI]

Sh. Navnath Padwal Ji,

Don't you find difference between non-taxable supply andnon-GST supply ?

[Shilpi Jain]

Also if u carefully read through the provision of section 17(2) extracted in the reply above, the credit can be taken only to the extent of taxable supplies.

Thereby clearly indicating that in case of all other supplies of credit will be eligible. Thereby even the sale of goods not liable to gst, no credit would be eligible

[Shilpi Jain]

You would find a number of cases under service tax regime in the context of reversal of credit w.r.t. trading of goods in the period in which it was not defined as an exempt supply in the law. Same will apply for this scenario as well.

AI Summary

Input tax credit accumulation may be restricted where non-GST fuel sales require proportionate reversal under GST apportionment rules.
Petrol pump dealers paying GST on licence or rent charges to OMCs may accumulate ITC in their electronic ledger, but ITC does not lapse automatically and is subject to utilisation limits and restricted refund routes. Where dealers make both taxable and exempt or non-GST supplies, ITC must be apportioned between taxable and non-taxable turnover and the portion attributable to exempt/non-GST supplies reversed, which can reduce or eliminate accumulated credit.