Payment of Output Tax on Castor Oil Seeds through utilisation of ITC taken on Gold & Silver Dore Bars can’t be denied merely for Absence of Nexus: AAAR [Read Order]

The Gujarat Appellate Authority of Advance ruling (AAR) has ruled that the payment of output tax on Castor Oil Seeds through utilisation of ITC taken on Gold & Silver Dore Bars cannot be denied merely for absence of nexus.

The Appellant, M/s. Aristo Bullion Pvt. Ltd. intends to engage in manufacturing as well as trading of Gold & Silver Bullion including Coins, etc. These activities require Gold & Silver Dore which may be procured domestically or imported as raw materials, on payment of appropriate GST. On outward supply of Gold & Silver items, the appellant intends to pay GST by utilizing ITC or by cash, if no balance of ITC is available. The appellant also intends to engage in the business of trading of Castor Oil Seeds. 

The appellant intends to purchase Castor Oil Seeds directly from unregistered Agriculturists without payment of GST. The appellant intends to supply the Castor Oil Seeds in domestic market as well as for export.

As the inward supply and outward supply of Gold & Silver bullion attracts the same rate of GST, the question arises as to how there can be a balance of unutilised ITC in the Electronic Credit Ledger of the appellant.

The applicant has raised the advance ruling on the issue that can the applicant/appellant use Input Tax Credit Balance available in the Electronic Credit Ledger legitimately earned on the inputs/raw materials/inward supplies (meant for outward supply of Bullions) towards the GST liability on Castor Oil Seeds which were procured from Agriculturists and subsequently meant for onward supply.

The coram of Milind Toravane and Seema Arora while modifying the Advance Ruling by the AAR, held that The applicant/appellant can use the Input Tax Credit Balance available in its Electronic Credit Ledger, which has been legitimately earned on the inputs / inward supplies (meant for outward supply of Bullions) for payment of ‘output tax’ (GST) on its outward supply of Castor Oil Seeds.

In other words, the AAAR held that payment of output tax on Castor Oil Seeds through utilization of Input Tax Credit taken on Gold & Silver Dore Bars etc. cannot be denied merely on the ground that the inputs have no nexus with outward supply.

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