A Transporter does billing under FCM. It also provide its lorreries to another transporter, which is exempted supply as well as it supplies exempted goods to its customers, which is also covered as exempted supply. Whether Transporter has to reversed its ITC against both types of supplies? If yes, then how to calculate GST amount to reverse?

ANSWER

Facts of the case:

A Transporter does billing under FCM. It also provides its lorreries to another transporter, which is exempted supply as well as it supplies exempted goods to its customers, which is also covered as exempted supply. Whether Transporter has to reverse its ITC against both types of supplies? If yes, then how to calculate the GST amount to be reversed?

Law Applicable:

Section 17 of CGST Act, 2017
Rule 42 & 43 of CGST Rules, 2017

Interpretation:

If the supply is exempted, then the credit is to be reversed as follows:

(1) For the inputs directly related to exempted supply, full credit is to be reversed.

(2) The credit of common input & services as well as common capital goods used to provide taxable and exempted services, the credit is to be reversed on a pro-rata basis as per provision of rules 42 & 43.

Copy enclosed.

Note: If the tax is paid on RCM basis by the receiver without taking any exemption which restricts availment of ITC on input services used to provide service, then credit may be taken by the transporter on input & input services used to provide transport services. (Reply dt. 25/11/2021)