Payment of the output tax on castor oil seeds through the use of ITC taken on gold and silver bullion from Dore cannot be denied only because of the lack of Nexus: AAAR

The Gujarat Appellate Authority of Advance (AAR) decision has ruled that payment of the output tax on castor oil seeds through the use of ITC taken on gold and silver bullion from Dore cannot be refused simply because there is no connection.

The complainant, M/s. Aristo Bullion Pvt. ltd intends to engage in the manufacture and trading of gold and silver bars, including coins, etc. These activities require gold and silver ores, which can be sourced locally or imported as commodities upon payment of the appropriate GST. For outbound delivery of gold and silver items, the Complainant intends to pay GST by using ITC or cash if no ITC balance is available. The complainant also intends to engage in the castor seed trade.

The complainant intends to purchase castor oil seeds directly from unregistered farmers without paying GST. The complainant intends to offer the castor oil seeds both on the domestic market and for export.

Since the inbound and outbound delivery of gold and silver bullion entails the same GST rate, the question arises as to how unused ITC can be offset in the complainant’s electronic loan book.

The applicant has raised the preliminary ruling on the issue that the applicant/complainant can use the input tax credit available in the electronic loan book that it lawfully acquired on the inputs/commodities/subcontracts (intended for the supply of precious metals) for the GST obligation on castor oil seeds procured from farmers and then destined for onward delivery.

The Coram of Milind Toravane and Seema Arora ruled in amending the AAR’s advance directive that the claimant/complainant can use the input tax credit available in their electronic loan book lawfully associated with the inputs/inbound deliveries (meant for the delivery of gold bullion abroad ) for paying the “Exit Tax” (GST) on the shipment of Castor Oil Seeds abroad.

In other words, the AAAR ruled that payment of the output tax on castor oil seed using the input tax credit for gold and silver bullion, etc., cannot be refused solely on the grounds that the inputs have no connection with the outbound supply.

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