No ITC on packing materials used for exempted supply of seeds: AAR July 11, 2018[2018] (AAR-CHHATTISGARH)

No ITC on packing materials used for exempted supply of seeds: AAR
July 11, 2018[2018]  (AAR-CHHATTISGARH)

GST : Where applicant supplies seeds (exempted item) in packaged form using such packing materials (taxable item), to its own branches in other States, then no ITC could be claimed on packaging material used for said exempted supply of seeds, whereas, if applicant supplies only packing material to own branches in other States, then ITC involved in purchase of such packing material could be availed as per section 17(2) of Chhattisgarh Goods and Services Tax Act, 2017

• The applicant, VSPL with multiple registrations under GST in various States is involved in business of supplying seeds in packaged form using packaging materials for sowing purpose. The seeds are exempted from GST whereas packing materials and other consumables are taxable. It also used to transfer aforesaid taxable inputs like packaging materials and other consumables from one branch to another and from one processing unit to another. The applicant has filed the application under section 97 of Chhattisgarh Goods & Services Tax Act, 2017 (CGST Act) requesting advance ruling to keep Input Tax Credit (ITC) of the packaging material till they are into their stock and regarding ITC while transferring goods between their own branches.

• The applicant contended that it transfers aforesaid taxable inputs within its own branches situated in various States across India and are required to pay GST merely for these inter-branch transfers. It was thus their contention that they are liable for multiple tax which is against the core principles of GST.

• As per provisions of section 17(2) of CGGST Act, 2017 any registered recipient can claim ITC to extent of taxable stock or taxable outward supply shown in their returns. The registered recipient cannot claim ITC on amount of taxable supply component included in total amount of exempted supply. The amount of unclaimed ITC shall also be reversed in electronic ledger of same month. Thus, it is clear from the provisions of section 17(2) of CGGST Act, 2017 that if applicant supplies seeds (exempted item) in packaged form using such packing materials (taxable item), to its own branches in other States, then no ITC could be claimed on packaging material used for said exempted supply of seeds, whereas, if applicant supplies only packing material to own branches in other States, then ITC involved in purchase of such packing material could be availed as per section 17(2) of CGGST Act, 2017.

• Thus, the applicant is not entitled to ITC on packaging material used for packaging seeds, while making such exempted supply of seeds to their own branches and to other purchasers. They are however, entitled for ITC (of tax involved in purchase of such packing material) on exclusive taxable supply of such packing material made to their own branches in other States, in terms of section 17(2) of Chhattisgarh Goods and Services Tax Act, 2017.