17 February 2022
Sir, One of our client has received a notice regarding reversal of input tax credit .Client is dealing of purchase of taxable and non taxable goods and sale of the taxable goods in the same percent of tax in which they are bought and sale of non taxable good in which they are bought. They are not using taxable input for exempt sale or nil rate sale. They are buying the zero rated and selling the zero rated. Department has asked to reverse the tax .Whether we need to reverse the same.
17 February 2022
Hi, First you need to check whether there is any common inputs like ITC on Professional Fees, Capital Assets, etc If there is any common input you need to reverse the ITC as per Rule 42 & 43 of the CGST Act
Apart from above you have to Prove to the Department regarding One to one transaction of Goods Purchase and Sold on Sample Basis that no other goods are sold as exempt other than which are purchased as exempt purchase.
If there is more clarity required you can consult some Professional for more clarification
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