Subsidy from Govt.

[Kaustubh Karandikar]

XYZ Ltd. receiving subsidy from government on which as understood no GST is payable. In that case, are they required to proportionately reverse the Input Tax Credit taken on common goods and services?

[Ganeshan Kalyani]

In my view no reversal is required.

[KASTURI SETHI]

Dear Sir,

I agree with Sh.Ganeshan Kalyani, Ji. The definition of 'Exempt Supply', inter alia, includes non-taxable supply. This does not include 'no-supply or non-supply'.Subsidy is non-supply/no-supply. To qualify as non-taxable supply, it must be 'supply' first in order to fall in the definition of 'Exempt Supply" for the purpose of reversal of ITC. Hence no reversal of ITC at all.

AI Summary

Subsidy treated as non supply, no reversal of input tax credit required on common inputs under GST. A government subsidy characterized as non supply does not fall within the statutory notion of Exempt Supply; therefore the proportionate reversal mechanism for input tax credit applicable to exempt or non taxable supplies is not triggered and no reversal of ITC on common goods and services is required.