supply of goods from bonded warehouse and ITC reversal

[Kaustubh Karandikar]

Supply of warehoused goods to any person before clearance for home consumption are exempted from payment of GST as per Sr. No. 8(a), Schedule – III to Section – 7 of CGST Act, 2017. Whether proportionate input tax credit is required to be reversed against such exemptions under Rule 42 of CGST Rules, 2017? Explanation (ii) under Section 17(3) of CGST Act, 2017 has been inserted through Finance Act, 2023 as per which, the value of such activities or transactions as may be prescribed in respect of clause (a) of paragraph 8 of the Schedule III will be treated as exempt supply. Whether relevant notification is issued to give effect to this change by which ITC reversal will be required if goods are Supplied from warehoused to any person before clearance for home consumption? Secondly, in my view the said amendment will not be applicable for High Sea Sales and therefore ITC not required to be reversed for High Sea Sales though exempted. Views of the experts please.

[Shilpi Jain]

The amendment to section 17(3) is yet to be notified. So not applicable as on date.

Even if this is notified, prescription has to be made for it to be implemented.

Agreed that high sea sales will not be included in this since that is a separate transaction type.

[Amit Agrawal]

I concur with Ms. Shilpi Jain Mam.

AI Summary

Input tax credit reversal uncertain pending notification and prescription for warehoused supplies; high sea sales likely excluded. Whether a proportionate input tax credit reversal applies to supplies from bonded warehouses before clearance for home consumption is contingent on a Finance Act amendment treating prescribed value as exempt supply; implementation requires formal notification and specific prescription, and currently the amendment is not notified. High sea sales are viewed as a separate transaction type and would not be captured by the same mechanism.