TaxTMI 
TaxTMI 
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?
Reversal of Proportionate ITC
20 Sep 2022 
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Proportionate input tax credit reversal may be required where common inputs serve taxable and nil rated supplies.
Proportionate reversal of input tax credit is required under Section 17(2) and Rules 42-43 only in respect of common inputs or input services used for both taxable and exempt (including nil rated) supplies; inputs purchased at nil rate or exclusively used for exempt supplies do not attract pro rata reversal. The reversal is computed on the common ITC according to the ratio of exempt turnover and performed monthly with a final annual adjustment. (AI Summary)
Proportionate reversal of input tax credit is required under Section 17(2) and Rules 42-43 only in respect of common inputs or input services used for both taxable and exempt (including nil rated) supplies; inputs purchased at nil rate or exclusively used for exempt supplies do not attract pro rata reversal. The reversal is computed on the common ITC according to the ratio of exempt turnover and performed monthly with a final annual adjustment. (AI Summary)