ITC Reversal

[Puneet Arora]

Hi Sir

I want to know some queries:-

Hello Sir

We have exported with 0 rated supply & we have received some exempted income like, Duty Draw Back, MEIS Licences, & SAD refund

our query is

what we will reverse the proportionate input tax credit again exempted income received , Duty drwa back, SAD REFUND , Licences.

Puneet

[KASTURI SETHI]

These are not exempted. Refund and drawback become due on account of export and tax already paid at the time of export on goods or inputs contained in final products exported.

[Puneet Arora]

Which Section we will not reversed the ITC

[CASusheel Gupta]

Dear Puneet

Duty draw back and SAD refund is actually refund of duties already paid by you as correctly replied by Kasturi Sir

Sale of MEIS Licences have been exempted from tax vide Notification No. 35/2017-Central Tax (Rate) Hence u will have to reverse proportionate ITC

Regards

CA Susheel Gupta

8510081001, 9811004443

[Ganeshan Kalyani]

I endorse the views of the experts.

[Brijesh Verma]

MEIS/SEIS scrips are made available as an export incentive under FTP. None of your input/input service can be attributable directly to earning such income (scrips). Rule 42 doesn't mandate such reversal. Rather, since a one-to-one correlation is available i.e. you can easily prove that all your inputs and input services are having a direct nexus with your taxable activity, there would be no requirement of reversal of any amount in respect of scrips. Basically, they are earned without incurring any expense particularly for such earning.

Comments are welcome.

AI Summary

Input tax credit reversal: duty drawback/SAD refunds differ from MEIS licence sales, affecting ITC reversal obligations.
Duty drawback and SAD refund are refunds of duties previously paid on exports and thus do not trigger input tax credit reversal. Sale proceeds of MEIS licences are treated as exempt supplies under Notification No. 35/2017 Central Tax (Rate) and generally require proportionate input tax credit reversal, although an alternative view contends that MEIS/SEIS scrips as export incentives may not necessitate reversal if a direct nexus between inputs and taxable supplies is demonstrated, with Rule 42 cited as not mandating reversal in such cases.