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: Reclassification Disallows ITC - Recipient Must Prospectively Adjust and Reverse Capital Goods Credit Under Rules 42-43 When a supply category is reclassified so that input tax credit (ITC) is subsequently disallowed, the recipient must generally adjust ITC prospectively under GST reversal rules. Capital goods acquired when 19%/18% ITC was available do not automatically require repayment of legitimately availed credit for past periods, but if the hotel's output becomes a class of supply for which ITC is denied, the taxpayer must reverse and pay proportionate ITC attributable to future use (typically spread over the residual useful life under the 5-year capital goods adjustment rules and Rules 42-43), unless a specific provision or retrospective amendment says otherwise. Obtain jurisdiction-specific advice.