ITC Reversal on Tax rate reduced to 5% with No ITC

[BIJO SCARIA]

I purchased capital goods (say, in a hotel) when the room tariff was taxed at 18% with ITC available. Later, the GST rate on hotel rooms was reduced to 5%, but with the condition that no ITC shall be available. In this situation, am I required to reverse the ITC that I had already availed when the tax rate was 18% because capital goods used less than 5 years only?

AI Summary

GST: Previously claimed ITC on capital goods at 18% need not be reversed solely due to rate cut to 5% If ITC was validly availed on capital goods when the output supplies were taxed at 18% with ITC, a subsequent rate reduction to 5% with prospective denial of ITC does not normally require reversal of credit already taken. Reversal obligations arise only where the nature of supply changes to exempt/non-taxable or capital goods are diverted to exclusively exempt use within prescribed adjustment periods. Specific operational rules may impose reversals in particular scenarios (e.g., statutory adjustment mechanisms); factual review is needed if those conditions apply.