Incentive Scripts and Reversal of ITC

[Narendra Soni]

We are exporter,We received MEIS scripts from DGFT as incentive, sold which are transfeble to others,hence we sold these scripts on which GST is exempted.

My query is whether any proportionate ITC is liable to reverse.

[Ganeshan Kalyani]

Yes, proportionate credit reversal is required.

[KASTURI SETHI]

Ultimately, duty credit scrips are to be used for payment of Customs duty.In my view, proportionate reversal of ITC is not required. Duty credit scrips are rewards earned as export incentive under MEIS and SEIS.

[Narendra Soni]

Dear Sir,

Agreed, it is incentive, not supply hence proportionate ITC need not to revers.

However, our CHA has registered the MEIS script with Customs authority and charge service amount with GST, I think the ITC on that bill is not eligible to us ??,kindly confirm

[KASTURI SETHI]

Sh.Soni Ji,

Why do you think so ? What is reasoning ? What is brewing in your mind ? Pl. share here. In my view, in this scenario ITC is allowed as this input service conforms to the parameters laid down in Section 16(1) of CGST Act. It is in the course of business. It is not hit by Section 17 of CGST Act as well.

[Narendra Soni]

Dear Sir,

Because GST on sale of MEIS script is exempted. We are not paying GST at the time of sale of it then how we can avail ITC which accrued on account of MEIS script.

Kindly confirm my logic is correct or not to avoid litigation by department.

[KASTURI SETHI]

Dear Sir,

You have said above, "CHA is charging service amount with GST". Pl. elaborate/clarify.

[Narendra Soni]

To sell/use of MEIS, it required to register with Customs authority and this work is done by our CHA for which he raise bill of services with GST to us.

Can ITC is eligible on such CHA bill.

[KASTURI SETHI]

Authority regarding non-reversal pertaining to pre-GST era.

Duty credit scrip - Reversal of amount under Rule 6(3) of Cenvat Credit Rules not applicable

Circular No. 973/7/2013-CX., dated 4-9-2013

 

[KASTURI SETHI]

In my view ITC is admissible. If you have even an iota of doubt, file an application with AAR. Dust will be settled once for all.

[YAGAY and SUN]

In our view, proportionate ITC is required to be reversed if MEIS/SEIS scrips are being sold. There is no GST is applicable on Selling of MEIS/SEIS as these are now exempted. However, for getting registered at Customs Ports, the GST so charged for providing of such services by Customs Brokers, if availed as ITC, then it is required to be reversed on the date of selling of MEIS/SEIS.

AI Summary

Input tax credit reversal: sale of GST exempt export incentive scripts may require proportionate ITC reversal, clarifying CHA charges.
Whether proportionate reversal of input tax credit is required when exporters sell GST exempt transferable export incentive scripts (MEIS/SEIS) is contested: some view the scripts as incentives not supplies and deny reversal, while others assert sale of exempt scripts necessitates proportionate ITC reversal. Separately, GST charged by Customs House Agents for registering or enabling use of scripts raises debate on ITC eligibility - some treat such CHA charges as allowable input services, while others say ITC must be reversed to the extent attributable to the exempt sale; an advance ruling is suggested to settle the issue.