Petrol bunks & GST (2): ITC apportionment under Rules 42 and 43

Because fuel sales are non-GST (treated as exempt for ITC), outlets must apportion ITC on common inputs, input services and capital goods between taxable and non-taxable turnover.

• Section 17(2) of the CGST Act: where goods/services are used partly for taxable supplies and partly for exempt supplies, ITC is restricted to the taxable portion. Section 17(3) and the definition in Section 2(47) treat non-taxable supplies (like petrol and diesel) as exempt for this purpose.
• Rule 42 (inputs and input services) and Rule 43 (capital goods) prescribe the formula. Common credit is split in the ratio of exempt turnover to total turnover, with monthly computation and annual true-up.
• Exclusively used for taxable supplies (e.g. lubricant purchases for resale): full ITC, subject to other conditions.
• Exclusively used for fuel (non-GST): no ITC.
• Common (e.g. electricity-related services, security, canopy repairs, accounting fees, telephone, some capital goods): apportion.

Practice tips

• Tag every purchase ledger as taxable-only / fuel-only / common from day one.
• Keep a monthly Rule 42 worksheet and do the annual adjustment before the September/November return.
• Explanation to Rule 43 and Section 17 wording matter for capital goods like dispensing units. Get the CA's view for each outlet.