Reversal of ITC on capital goods from over all sales 80% supply is exempted

[PN ELAMPARRUTHY]

During audit asking to reversal the Common credit . Basically firm is Rice Mill,Sale of rice in Above 25 KG. any case related or any AAR

[KASTURI SETHI]

Pl. elaborate your query. It is too short to reply correctly.

[PN ELAMPARRUTHY]

purchased plant machinery for processing of paddy into rice and husk . rice mostly exempted product and its by product husk and some 5 kg and 10 kg sales happening . for Eg from total Turnover 5 cr means 50 lakhs only taxable . from 18-19 not reversed any ITC ..

[Shilpi Jain]

If you have used any goods or services commonly for taxable and exempt product then you would have to reverse credit of GST in proportion of the exempt turnover.

[Padmanathan KV]

I agree with experts. Also see if your client is exporting rice. Even if exempted, credit will be eligible towards zero-rated supply.

AI Summary

Reversing ITC on Capital Goods: Proportionate Reversal Required for Exempt Sales in Rice Mills Under GST Rules A discussion on a forum addresses the issue of reversing Input Tax Credit (ITC) on capital goods for a rice mill, where 80% of sales are exempt under GST. The original query highlights that the firm has not reversed any ITC since 2018-19, despite most sales being exempt. Respondents advise that if goods or services are used for both taxable and exempt products, ITC must be reversed proportionally to the exempt turnover. Additionally, it is suggested that if the firm exports rice, ITC may still be eligible due to zero-rated supply provisions.