*In the Favour of Taxpayer*
Whether there is requirement of proving nexus between Inputs and Output in order to avail Input Tax Credit. Can ITC of goods falling under different HSN Code be availed against the output liability of supply made in different HSN/SAC?
The Appellate Authority for Advance Ruling, Gujarat in M/s Aristo Bullion Private Limited has reversed the ruling of AAR to hold that the nexus between the input and output is not necessary when setting off ITC against the output liability. It held that once an ITC is found eligible and is parked in the Electronic Credit Ledger, it looses its identity and becomes part of the common pool. In terms of Section 49 of CGST Act 2017, the said ITC is available with the taxpayer to knock it off against its output tax liability. Hence, the benefit of ITC cannot be denied merely on the grounds that there is no nexus between input and output. Where an ITC fulfils the conditions of Section 16, no nexus is required.
The Ruling is absolutely appropriate as the basic fundamental of GST was “seamless flow of Credit”. Once the eligible ITC gets parked in the Credit Ledger, no question on its utilisation can be raised on the grounds of not having nexus. At various occasions, various courts and tribunals have held that the Credit Ledger is in the form of cloud where once a credit is parked, it looses its independent character. It would be interesting to see whether department would permit knocking of ITC pertaining to goods against the output liability of services. For instance a trader may wish to knock off ITC on his trading goods against the output tax on the rental income from commercial property. Though the view of AAAR, Gujarat is absolutely clear in this respect also.
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