The Tax Publishers

GST--Input Tax Credit

Lack of Nexus Between Input and Output SupplyAllowability of ITC

Lack of Nexus Between Input and Output Supply--Allowability of Input Tax Credit

Divya Rathi

The learned author seeks to analyse an issued as to whether ITC is allowable on input meant for outward supply of Bullion for payments of GST liability on Castor Oil Seeds. The related issue is being discussed in the light of relevant

1. Introduction

In the case of M/s. Aristo Bullion Pvt. Ltd. [Advance Ruling No. GUJ/GAAR/R/15/2021, dated 27-1-2021] Gujarat AAR has held that applicant cannot use Input Tax Credit (ITC) 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 Seed procured from Agriculturists and subsequently meant for onward supply, as there is no nexus/connection between the inputs and the final product since the inputs are not used or intended to be used in the course or furtherance of the business of supply of Castor Oil Seeds.

Since GST law has been introduced with an intention to allow a consistent utilisation of input credits against output tax liabilities in order to decrease the cascading effect of taxes. However, if as per above decision of AAR it is necessary to establish nexus/connection between the input tax credit and the output tax liability, it will give rise to major blocking of ITC and other major issues. In this article, seeks to highlight on the Gujarat AAR decision.

2. Facts of the Case