Reversal of Proportionate ITC

[Kaustubh Karandikar]

XYZ is supply product ‘A’ which is taxable and therefore charging GST. XYZ also buying Product ‘B’ which is attracting ‘Nil’ duty as per tariff. The same they are supplying without charging GST since attracting ‘Nil’ GST. Is XYZ required to reverse proportionate ITC against supply of product ‘B’ without GST, even if at the time of purchase itself it was attracting ‘Nil’ GST?

AI Summary

Debate on XYZ's Need to Reverse Proportionate ITC for Nil GST Product B under Section 17(2) of CGST Act 2017 A query was raised regarding whether a business, XYZ, needs to reverse proportionate Input Tax Credit (ITC) for supplying Product B, which attracts 'Nil' GST, while Product A is taxable. According to Section 17(2) of the CGST Act, 2017, and related rules, proportionate ITC should be reversed based on the ratio of exempted supply turnover. However, opinions varied; some argued that reversal is unnecessary if no common inputs are used for both taxable and exempt supplies. The discussion highlighted differing interpretations of the GST laws and the need for clarity in applying rules to specific scenarios.