export of used capital asset on which input tax credit has been taken

[Prasenjit Pal]

we have purchased a machinery in yr 19-20 on which full input tax credit has been taken. Now we want to export it. can we do it now? what are the conditions ? Is ITC reversal is required?

[KASTURI SETHI]

You can export now . No reversal is required.

[ABHISHEK TRIPATHI]

Have a doubt Sir, when the capital goods are supplied in India then there is reversal in light of Section 18 and the calculation will be in accordance with Rule 40(2) or Rule 44(6) r/w Rule 44(1)(b).

Why in export such requirement isn't there?

[KASTURI SETHI]

Sh.Abhishek Tripathi Ji,

Re-examined the issue.

Sir, I agree with you. Reversal is required de jure.

[Atul Mehrotra]

Dear experts.

Since export is a zero rated supply, shouldn't ITC be available based on section 16(2) of IGST Act? Please explain why is there a requirement to reverse proportionate ITC?

[ABHISHEK TRIPATHI]

Dear Atul Sir,

For me it is ambiguous. How will you read S. 16(2) of the IGST and S. 18(6) of the CGST in consonance. On provisions allows you to take ITC on zero rated supplies and the other ask for reversal on supply of capital goods.

[Vishwanath Bhat]

Yes, You can export, ITC reversal depends on transaction value.(GST to be paid remaining ITC or GST on transaction value, whichever is higher)

[KASTURI SETHI]

Section 2(19) of CGST Act says  “capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business;

In this scenario, the capital goods are being removed after use for two years. It is not as such. Whether removal after use or as such in both ways, the value of such goods will be de-capitalised from the books of account and hence will be out of definition of 'capital goods' .

I humbly request experts to examine the issue in the light of above expression.

[Punit Agarwal]

I believe ITC might be required to be reversed. But there is a safe side to it.

You Export the goods on payment of taxes under section 16(3)(b). It will help you save the Cost of ITC.

[YAGAY andSUN]

There is no duty or taxes on Export except on some goods. If there is no accumulation of ITC and Working Capita issue, then, Export under LUT is feasible.

AI Summary

Debate on ITC Reversal for Exported Machinery: Aligning GST and IGST Provisions on Zero-Rated Supplies and Capital Goods A discussion on the export of used capital assets, specifically machinery purchased in 2019-2020 with full input tax credit (ITC) taken, raised questions about whether ITC reversal is necessary upon export. Initial responses suggested no reversal was needed, but further examination indicated that reversal might be required under certain conditions. The debate highlighted the complexity of aligning provisions from different sections of the GST and IGST Acts, particularly concerning zero-rated supplies and the supply of capital goods. The consensus leaned towards the necessity of ITC reversal depending on transaction value, with suggestions for exporting under specific sections to mitigate costs.