The Karnataka Appellate Authority for Advance Ruling ( AAAR ) has held that the question regarding the claim of Input Tax Credit (ITC) on common input services is admissible for advance ruling under section 97(2)(d) Central Goods and Services Tax Act.
The appellant Bharatiya Reserve Bank Note Mudran Pvt. Ltd. is established by the Reserve Bank of India as their wholly-owned subsidiary, engaged in the printing of currency notes for the RBI at their own two currency printing press units at Mysore and West Bengal. The currency notes are sold to RBI at an agreed rate and are wholly exempted from the levy of GST.
The Mysore unit has an Ink Manufacturing Unit called ‘Varnika’ and the manufactured ink is captively consumed by the Mysore unit and transferred to West Bengal Unit, since the supply of goods between distinct persons, GST is paid on supply between two units. The manufactured ink is also sold to M/s Security Printing and Minting Corporation of India (SPMCIL) on payment of GST.
The appellant avails of Input Tax Credit on the raw materials used in the manufacturing of ink as well as on the services used exclusively in the manufacturing of ink. The appellant claims ITC for the supply of ink to the West Bengal unit as it is a taxable supply. The appellant receives services that are commonly used by both Varnika IMU and the printing press at Mysore.
Hence, the appellant approached the Advance Ruling Authority for clarifying whether ITC can be claimed on common services which are utilized for both taxable as well as exempted supplies. The AAR refrains from giving a ruling on the ground that the impugned questions were not covered under section 97(2) of the GST Act. The aggrieved appellant filed an appeal before the AAAR.
The appellate authority observed that the question of admissibility of ITC on the common input services will depend on whether the same is used in the course or for the furtherance of his business and whether the services are blocked under section 17(5). The lower Authority has failed to answer the question stating that section 97(2) does not cover situations governed by section 17(2) of the CGST Act. The Appellate Authority further held that the question undoubtedly involves examining the admissibility of credit and the lower authority was incorrect in not giving a ruling.
The Coram of Smt. Ranjana Jha and Smt. Shikha C has held that “the question of whether ITC can be claimed on common services which are utilized for both taxable as well as exempted supplies is admissible for advance ruling as it falls within the scope of section 97(2)(d) of the CGST Act”.
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