Reversal of Common Input Tax Credit

[HITESH DEDHIA]

Reversal of Common Input Tax Credit under GST is required for Exempted Supplies/Services. The Company has earned Interest on Loans & Advances/Deposit. Whether Interest income is considered as exempted for Calculation of Proportionate Exempted Sales to Taxable Sales.

[DR.MARIAPPAN GOVINDARAJAN]

In my view it is not. It is applicable to the exempted supply of goods/services or both.

[KASTURI SETHI]

Answer is yes. It is normal/routine interest. The amount of interest earned on account of default payment/delayed payment is taxable under GST. See the definition of taxable value under Section 15 of CGST ACT, 2017

[DR.MARIAPPAN GOVINDARAJAN]

The interest is not on default but on loans and advances.

[KASTURI SETHI]

Dr.Govindarajan Sir,. I agree with you in toto.

[Himansu Sekhar]

Loan is not a service. Interest is also not a supply at all.

[YAGAY andSUN]

Interest does not fall under the category/definition of supply.

AI Summary

Debate on whether interest income from loans is exempt for GST calculations, referencing Section 15 of the CGST Act, 2017. A discussion on a forum addresses whether interest income from loans and advances should be considered exempt for calculating the proportionate exempted sales to taxable sales under GST. One participant argues that interest income is not applicable to exempted supplies, while another contends that routine interest is taxable under GST, referencing Section 15 of the CGST Act, 2017. Further replies suggest that loans are not services and interest does not qualify as a supply, indicating a consensus that interest income should not be considered exempt for the purpose of input tax credit reversal.