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ITC restriction

venkateswara reddy gudemupati (33 Points)

14 November 2020

1. Tax payer dealing in pesticides (taxable) and also Agricultural seeds (exempted). Maintaining separate purchase and sale ledgers.
2. Filing GSTR-3B return reporting sale turnovers of pesticides and agricultural seeds and adjusting ITC accrued on purchase of Pesticides against output tax payable on sale of pesticides.
3. In this scenario, whether ITC restriction arises or not?

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8 Replies

JATINDER KUMAR (Accountant) (3662 Points)
Replied 14 November 2020

Yes, you can not claim full ITC

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Shivam RC (Student) (23683 Points)
Replied 14 November 2020

Yes you can claim ITC but incase of Capital Goods which are being used both for supplying Taxable Goods ( Pesticides ) as well as Exempted Goods ( Agricultural Seeds ), you have to reverse proportionate ITC and follow the Provisions of Section 17 and 18 of the CGST Act 2017.

venkateswara reddy gudemupati (33 Points)
Replied 14 November 2020

He is a trader,i.e purchase and sale only. No involvement of capital goods.

JATINDER KUMAR (Accountant) (3662 Points)
Replied 14 November 2020

You can not claim full ITC if you use common services for trading of goods

For example if ITC availed by you on following services

Rent

Telephone expenses

Advertisement expenses

Professional and Legal Fees

etc.

Ranga raj (still studying) (122 Points)
Replied 14 November 2020

Sir, The ITC relating to the expenses incurred for the sale of pesticides can be claimed but common expenditures incurred for both exempt sales and taxable sales like purchase of stationary, audit fee should be claimed proportionately on turnover basis. For detailed clarification read rule 42 & 43 of CGST Act and reversal of common credit.