ITC in case of mixed supply

[husen kadwalwala]

Dear sir,

we are in process of manufacturing corn flakes and cattle feed.

1. corn flakes @ 5% GST

2. cattle feed is nil rated

for packing material we follow process where we take complete credit for packing a material used in corn flakes packing.

we dont take any credit for nil rated supplies.

is this the right approach ?

[Ganeshan Kalyani]

Yes , it is correct.

Apart from this credit there may be other credit like consultancy service, audit fees etc. where you can take credit to the extent of corn flakes supply. The turnover ratio can be taken to arrive at the proportionate credit eligible.

[KASTURI SETHI]

Proportionate ITC has to be taken as per formula under Rule 42 of CGST Rules.

[Shilpi Jain]

If you can identify the packing material expenses for both separately, you can take full credit of the packing material for corn flakes. and reverse full ITC relating to feed.

AI Summary

Input tax credit apportionment: allocate credits between taxable and nil-rated supplies, reversing or proportioning shared inputs. Input tax credit for mixed supplies must be allocated between taxable and nil-rated outputs based on identifiable usage or a proportionate apportionment method; identifiable inputs used solely for taxable supplies may attract full credit, while credits attributable to nil-rated supplies must be reversed, and common inputs or services should be allocated using a turnover-based formula where identification is not possible.