QUESTION

Is sale of MEIS licence is exempt or Nil rated? If it is exempt then is there a need to reverse input tax credit?

ANSWER

FACTS OF THE CASE:

Eligibility of ITC in case of MEIS license.

LAW APPLICABLE:

SECTION 17 OF CGST ACT
(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Notification No. 02/2017 Central Tax (Rate)

INTERPRETATION:

Sale of MEIS license is exempt supply as per s.no. 122A of Notification No. 02/2017 Central Tax (Rate).

Further as per sub section (2) of section 17 of CGST Act related to "Apportionment of credits and blocked credit" ITC is eligible only to the extent it is attributable to taxable supplies including zero rated supplies.

Therefore ITC related to MEIS license is not eligible as per section 17(2) and required to be reversed if claimed.

CONCLUSION:

ITC claimed related to MEIS license is required to be reversed being exempt supply. (Reply dt. 03/05/2022)