NIL Rated Supply and ITC Reversal

[Kaustubh Karandikar]

XYZ among other services, is also supplying the services of freight forwarding i.e., transportation of goods by Sea for export. As per the exemption notification, this service attracts ‘Nil’ GST and therefore XYZ are not paying GST on these amounts recovered from the Indian client. Is XYZ required to proportionately reverse the ITC for supplying these ‘Nil’ rated services? In my view yes they are required to reverse. Views of the experts please.

AI Summary

Freight Forwarder XYZ Must Reverse Input Tax Credit for 'Nil' GST Services; 'Pure Agent' Status Unlikely XYZ provides freight forwarding services for goods transported by sea for export, which are classified as 'Nil' GST services. The query raised concerns whether XYZ must reverse the Input Tax Credit (ITC) proportionately for these services. The consensus among participants is that ITC reversal is necessary unless XYZ can qualify as a 'pure agent,' which is deemed unlikely due to the nature of their service charges. The discussion highlights that the 'pure agent' status is not applicable as XYZ charges a markup and does not operate on a reimbursement basis.