Question

Going by the above reply , I have further queries:
i) Would your above reply be different , if I am utilising all my ITC in selling another Zero rated item in India which does not utilise any of the common inputs stated above ( Raw material / Packing Material )

As you have advised us to segregate the inputs on the basis of Turnover :

ii)How would we utilise my ITC in CGST and CGST for the export related as the same can not be used for export where only IGST is applicable.

iii) Can I utilise the same ITC for clearing my liability of CGST and SGST on domestic sales as I can not use the same for Exports Sales.

iv) How to decide the ratio of Domestic Vs Exports Sales so to utilise the ITC available ( whether as per last year data/ last 3 years average ).

v) If so, could we review the ratio in the mid of the year and change it as per our convenience to utilise the remaining ITC carried forward pertaining to Exports Sale.

 

Answer
 

If you are engaged in providing of supply which are taxable as well as exempted, Section-17 of CGST Act will apply along with Rule 42/43 of CGST Rules. The same is explained in simple language as follows.

1. All the credit relating to input/input services/ capital Goods which are fully used for taxable supply is available in full.
2. All the credit relating to input/input services/capital goods which are used for exempted supply is not available in full.
3. The credit will be reversed as per the guidelines of Rule 42/43 of CGST Rules when these are used commonly for providing both taxable and exempt supply.

When you are exporting goods it is zero rated but not exempt. However if you are exporting a product which is exempted from tax it will not be considered as zero rated. The ITC on input etc. will be governed by point 2 given above and no credit will be available.

Tax planning:- if you are engaged in manufacture and export of products which are exempted from tax then you can go for Advance Authorization/EPCG scheme and can procure the Input/Capital goods without payment of tax even from domestic market. (Reply dt.08/01/2019)