GST credit reversal

[Madhavan iyengar]

How does the credit reversal mechanism work in GST- If a person in business had some investment land which he sold will he have to reverse ITC since he has not taken any ITC which is related to land if business is on verge of closure and he has accumulated itc in this situation also should he reverse ITC as there may be a situation wherein as at march 18 a company had accumulated credit of ITC

April to sept 18 there was no business but in Sept 18 land is sold which is exempt will it invite reversal

sec 17(2) mentions where goods and services or both are used partly for effecting taxable and partly for exempt the amount of credit shall be restricted to so much as is attributable to taxable supplies.

does it mean there is a common pool of itc and since it is not possible to arrive at how much is used for taxable and exempt we have to reverse ITC of common credit.

[V ALAGAPPAN]

the ITC must have been taken from a common input used for making taxable and exempted supplies is the precondition for reversal. for example if you have taken credit from raw material and has not used such raw material for making the exempt supply of land then the ITC taken on raw material need not be reversed.

AI Summary

Input tax credit reversal - required only when credited inputs are actually used to make exempt supplies, including exempt land sales. Reversal of input tax credit is required where credited inputs or services are used to make exempt supplies; if the ITC claimed was not on inputs actually used for the exempt sale of land, no reversal is necessary. Accumulated credit during inactivity is not automatically reversible unless it is attributable to inputs used for the exempt supply.