Restriction on input tax credit

Hi

1. Yes, for ITC used in procuring fertilizers and pesticides will be eligible credit.

2. Rule 42 and 43 shall have to be applied in case there are any common credits or credits specifically for sale of paddy.

Hi,

1. Yes, you are entitled to full input tax credit on the purchases of such fertilizers and pesticides. 

2.Sec 17(2) of the CGST Act, 2017 provides that where the goods or services are used partly for effecting taxable supplies (including zero rated) and partly for exempt/ non-business use then the amount of credit as attributable to exempt supplies or non-business use shall be reversed as per Rule 42/43 of the CGST Rules, 2017.

It is advisable to take a phone consultation for detailed discussion.

You can claim ITC but you need to pay GST on sale of pesticide as you have received "consideration" in form of Paddy and hence for that transaction you need to pay output tax and later you are selling paddy which doesnt attract any tax.

You only need to reverse the credit of goods used commonly for both business. Since the fertilizer and pesticides is not used for paddy business no need to restrict its usage.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Hello,

1. Full ITC would be available on the purchase of fertilizers and pesticides.

2. Since the input tax credit on input goods would be attributable to only taxable supplies of fertilizers and pesticides, full credit would be available on the purchase of fertilizers and pesticides.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

Hii

in situation-1

value of paddy is your sales consideration of pesticides/ fertilisers thus no issue of gst itc on pesticides/ fertiliser 

situation 2 

yes you are eligible for full itc on specific products sale purchase ie pesticides/fertiliser 

but common inputs if any are subject to some restrictions