28 June 2019
Hi, We supply MEIS licenses the entire process for license application is done inhouse that is no outside consultation is taken and therefore we do not avail any itc on such service.. However now when i have applied for refund against exportrs the assessing officer is asking me to reverse proportionate ITC on such licenses sold .Sale of license is an exempt supply. and we are not availing any ITC on aqusition of such license. How can i convince the AO. And what would be the relevant sections which state that ITC on exemt services are ineligible.
28 June 2019
Sec 17(2) of the CGST Act, 2017 provides that where the goods or services are used partly for effecting taxable supplies (including zero rated) and partly for exempt/ non-business use then the amount of credit as attributable to exempt supplies or non-business use shall be reversed as per Rule 42/43 of the CGST Rules, 2017.
28 June 2019
Hello Sir, But when no credit has been availed does the rule still apply . because this would then amount to undue hardship to the taxpayer.
28 June 2019
The ITC on any expenditure shall be reversed proportionately only if such expenditure is used for effecting taxable and exempted supplies. If none of the common services is used for effecting exempted supplies, then credit shall not be required to be reversed. As the section 17(2) clearly specifies that if the supplies are used for effecting taxable and exempted supplies then only credit is required to be reversed proportionately if not, no reversal is required.
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