Input tax credit— Section 16 of CGST Act— In the instant case, appellant has filed an appeal against the Advance Ruling passed by the Gujarat Authority of Advance Ruling. 

The only issue involved in this appeal is that whether the Input Tax Credit (‘ITC’) legitimately earned by the appellant and lying as balance in Electronic Credit Ledger can be utilised for payment of GST on an outward supply, which has no nexus with the inputs on which the ITC has been taken.  The GAAR has considered this issue and passed a Ruling to the effect the applicant cannot use the Input Tax Credit Balance available in the Electronic Credit Ledger legitimately earned on the inputs/raw materials/inward supplies (meant for outward supply of Bullions) towards the GST liability on ‘Castor Oil Seed’ which were procured from Agriculturists and subsequently meant for onward supply.

The appellant intends to utilise ITC taken on inward supply of Gold & Silver Dore / articles and lying in balance, for the purpose of payment of GST on their outward supply of Castor Oil Seeds.

Section 16(1) nowhere mandates to prove one-to-one correlation of particular inputs with particular outward supply. In other words, Section 16(1) does not require that payment of outward tax on particular outward supply can be made only from the ITC taken on particular inputs, which have nexus or connection with that outward supply. Therefore, we set aside the observation made by the GAAR to the effect, “It can therefore, be seen that even the basic conditions envisaged in the provisions of Section 16(1) have not been fulfilled in the instant case.”

Held that—  The applicant/appellant can use the Input Tax Credit Balance available in its Electronic Credit Ledger, which has been legitimately earned on the inputs / inward supplies (meant for outward supply of Bullions) for payment of ‘output tax’ (GST) on its outward supply of Castor Oil Seeds.