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 and SUN]

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

Input tax credit reversal questioned for export of used capital goods, highlighting conflict between ITC entitlement and reversal rules.
The text addresses whether export of a used capital good that attracted input tax credit requires reversal, noting a statutory tension between entitlement to ITC on zero-rated exports and provisions mandating reversal on supply of capital goods. Contributors give divergent views: some deny reversal for exports, others assert reversal is required, and practical approaches suggested include exporting under LUT, exporting on payment of tax to preserve cost, or applying existing domestic reversal calculation methods tied to transaction value.