Indian Oil Corporation can’t claim ITC on GST paid on Railway Freight for Transportation of ATF and Other Taxable Supplies: AAR [Read Order]

The Authority for Advance Rulings (AAR), West Bengal has held that the Indian Oil Corporation is not eligible to avail Input Tax Credit (ITC) on the GST paid on the railway freight for transportation of ATF and other taxable supplies.

“ATF and other non-taxable supplies from the Applicant’s Haldia Refinery to the export warehouse of Indian Oil Corporation Ltd at Raxaul are not zero-rated supplies. They are non-taxable supplies from the Applicant to the Bihar Unit of Indian Oil Corporation Ltd, who are distinct persons in terms of section 25(4) of the GST Act. The Applicant cannot claim credit of the GST paid on the railway freight for transportation of ATF and other non-taxable supplies from West Bengal to the Bihar Unit,” AAR order said.

Indian Oil Corporation Ltd, engaged in the activity of refining crude petroleum oil into, High Speed Diesel (HSD), Motor Spirit (petrol), and Aviation Turbine Fuel (ATF), approached the AAR for a clarification that whether they are eligible to avail input tax credit on GST paid on the railway freight for transportation of the above goods from the its Haldia Refinery to the its export warehouse at Raxaul.

Under the GST laws, no tax on supply of which is leviable on the said goods under the CGST/WBGST Acts, 2017.

In support of their claim, the IOC argued that since the transportation from Haldia Refinery to Raxaul Depot is occasioned by an agreement for export of goods to Nepal. According to the Applicant, the goods are transferred to the export warehouse at Raxaul in terms of an export agreement with no scope of diversion for home consumption. It is export within the meaning of Section 5 of the CST Act.

The authority observed that the goods re-warehoused at Raxaul Depot are not moved from Haldia under specific export order and can be either cleared for home consumption or exported. It is, therefore, far from a mere transit point, but the point of storing and final clearance. The final clearance being made from the export warehouse at Raxaul, it is the Bihar Unit that is responsible for export or payment of duty if diverted to home consumption.

“In fact, Indian Oil Corporation Ltd admittedly reports the export in the GST returns of his Bihar Unit and not in the ones for the West Bengal Unit. If it were to be treated as export of the West Bengal Unit, ‘export’ reported would have widely varied with the actual export measured on the basis of PDOs and lifting from the supply point at Raxaul. Clearly, the transportation from Haldia to the export warehouse at Raxaul is no measure of actual export. The Applicant himself is well aware of the anomaly and has not reported in his returns the transaction as export under section 5 of the CST Act either. Apparently, the Applicant’s arguments are at variance with what he and the Bihar Unit have reported in their returns under both the CST Act and the GST Act,” it said.

To Read the full text of the Order CLICK HERE