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GST REVERSAL UNDER RULE 32

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Harsh Jhawar

student

36 Points Posted on 08 March 2020

Pls suggest regarding my query.
A Dealer who runs an oil Mill purchases a cotton seed which is taxable @ 5%.
For example we may consider he purchase cotton seed for rs 1000000 and gst on it is rs. 50000.
Now he sale out 50% cotton seed as it is after adding his profit and for remaining 50% he put into crushing and two products get manufactured 1 is Oil and another is Cotton cake. Here cotton cake is exempted and oil is taxable from the manufacturing process 92% cake is manufactured and only 8% oil is manufactured. Now he has to make reversal of itc so my query is will he be able to take 50% itc fully which he have sold out as it is and for remaining 50% Rule 42 of gst reversal will apply or for full 100% Itc

Replies (3)

Quick Summary

This discussion addresses a query regarding Goods and Services Tax (GST) input tax credit (ITC) reversal for an oil mill. The dealer purchases taxable cotton seeds and then sells 50% as is, while crushing the remaining 50% into oil (taxable) and cotton cake (exempted). The core question is how to correctly reverse ITC, specifically whether the full ITC on the crushed portion should be reversed or if a partial reversal based on the exempted supply is applicable under Rule 42.