Reversal of ITC in case of Nil Rated Supply of Goods

[DS Pal]

Dear Experts,

We have imported Oats Grains from outside India and Sold the same domestically apart from some other taxable supplies. Since the said items falls under HSN 1004 in Schedule I (List of Nil Rated Goods), we have not charged GST on sale and accordingly declared as Nil rated supply in GST return. Is there any reversal of ITC required in such scenario? Please given reference if yes/no.

Thank you

[Raam Srinivasan Swaminathan Kalpathi]

Yes ITC reversal is mandatory not only on the directly related supplies but on the proportionate common inputs like rent, consultancy, audit fees, stationery relating to the said period.  Thanks

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir,

I concur with Sri Sri Kalpathi Sir. Exempted supplies along with Taxable supplies required to reverse ITC proportionately as provided under Rule 42 of the GST Law.

[KASTURI SETHI]

Yes, reversal is required as per Section 17 (1) & (2) of CGST Act, 2017.

[Shilpi Jain]

Specific expenses for making the exempt supplies (GST on machinery, etc.) - not eligible for credit.

Common expenses (like rent, etc.) - to be claimed only in proportion of taxable turnover during the year.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sirs, 

I do agree with Sri Devara Sivaprasad. 'Seigniorage' charges are similar to Royalty charges and are payable under RCM as  Sri Kasturi Sethi Ji opined.  The query does not explain how it was paid under FCM. Once tax liability is admitted on the same, there is no need to pay again. 

[KALLESHAMURTHY MURTHY K.N.]

The reply at No. 5 is related to Query Issue ID 11948 dated 26-12-2024 wrongly uploaded under this issue. 

The same may please be read appropriately.

AI Summary

Input tax credit reversal required for nil rated supplies; common inputs must be apportioned to taxable turnover. Reversal of input tax credit is required for nil rated supplies: credits on inputs exclusively used for nil rated sales are ineligible, and credits on common inputs and overheads must be apportioned and reversed pro rata so only the taxable proportion is retained, under the prescribed rule based apportionment framework.