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.

AI Summary

GST Exemption for Bonded Warehouse Supplies: Rule 42 ITC Reversal Not Required Until Finance Act 2023 Amendment Notified A discussion on the exemption of GST for goods supplied from a bonded warehouse before clearance for home consumption and the need for input tax credit (ITC) reversal under Rule 42 of the CGST Rules, 2017. The query addresses whether the Finance Act, 2023 amendment to Section 17(3) of the CGST Act, 2017, which treats such transactions as exempt supplies, necessitates ITC reversal. Respondents note that the amendment has not been notified, and high sea sales are excluded from this requirement. Both respondents agree on these points.