Regarding Agriculture equipment's (Shovel) ITC

[mahesh rao]

All Dear Experts,

Good Morning,

Sir we are manufacturing the shovel that is 0% product.

1. My quires is we have purchased the raw material like( Sheets, Pipes) with gst invoice. So can we taken input that ITC from raw material invoice ITC?

2. Some person told me you have to reverse the ITC which is purchase of raw material with gst.

Sir I am so confused please advice me that should I taken ITC input from Purchase Or Not. and Will I have to reverse the ITC.

[KASTURI SETHI]

Sh.Mahesh Rao Ji,

If you want to take ITC on the tax paid on your purchase of material for manufacture and supply of shovel, you must be able to utilise the same for payment of tax on your taxable outward supply in the course or furtherance of business as per Section 16 (1) of CGST Act. For utilization of ITC supply of goods or services or both must be taxable. Shovel being agricultural equipment/implement is exempted vide Notification no. 12/17-CT(R) dated 28.6.17.

If you are engaged in any other taxable outward supply of goods or services, you will be able to use that credit earned on tax paid on your purchase of sheets, pipes etc. In that situation, you need not reverse. In GST there is no one-to-one correlation.

You cannot claim refund of ITC accumulated because of all exempted outward supplies. You will have to use that credit in taxable supply.

[KASTURI SETHI]

There is another option for you.

There is time limitation for taking ITC but there is no time restriction for utilising ITC. If you plan to supply any taxable outward supply of goods or service later on at any time, you can accumulate credit of ITC in respect of tax paid on purchase of raw material and use that credit for taxable outward supply later on, since no one-to-one correlation required in GST as already mentioned above.

[Shilpi Jain]

Utilisation of ITC and availment are 2 different things.

First eligibility for availing has to be seen. In the present case the input is used for supplying exempt goods. So clearly no ITC eligible.

[Shilpi Jain]

In case you are eligible for credit for any transaction and say for instance you are not able to use it, for whatever reason, even then you can and should take the credit.

Thus availing of credit is never dependent on whether u can use it or not.

AI Summary

Input tax credit eligibility limited where outward supplies are exempt; credit is usable only against taxable supplies later. Supply of shovels is exempt; entitlement to Input Tax Credit on tax paid for raw materials depends on whether the taxpayer makes taxable outward supplies. If the taxpayer has taxable supplies, ITC on purchases may be availed and used against taxable liabilities without one to one correlation. Where outward supplies are only exempt, ITC on inputs used for those supplies is not claimable and refunds for ITC accumulated due to exempt supplies are not available. ITC may be accumulated and utilised later if taxable supplies are undertaken, subject to eligibility to avail credit.