TaxTMI 
TaxTMI 
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.
NIL Rated Supply and ITC Reversal
16 Oct 2021 
6 Replies 
5127 Views Asked by
Input tax credit reversal required for nil rated freight forwarding unless genuine pure agent reimbursement is demonstrable.
Proportionate reversal of input tax credit is required for nil rated freight forwarding supplied as a forward-charge service with a markup, because such supplies do not meet the conditions of a pure agent reimbursement. Only where the supplier truly acts as agent and recovers actual expenses without markup, or the margin can be separated or disclosed to characterise reimbursements, will the pure agent exception avoid ITC reversal. (AI Summary)
Proportionate reversal of input tax credit is required for nil rated freight forwarding supplied as a forward-charge service with a markup, because such supplies do not meet the conditions of a pure agent reimbursement. Only where the supplier truly acts as agent and recovers actual expenses without markup, or the margin can be separated or disclosed to characterise reimbursements, will the pure agent exception avoid ITC reversal. (AI Summary)