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ITC reversal requirement on warehoused goods - a half-baked amendment?


common ITC reversal on warehoused goods

Lawmakers seem to have consciously excluded the values of goods supplied from warehouse in Explanation under Section 17(3) of CGST Act,2017 so as to restrict common ITC on input services say like GST paid on office rent from where the business is carried out. Let us take one common input service on rent to understand the issue in proper perspective.

For ease of understanding, let us take that a business man doing Rs 10 cr annual turnover has made a turnover of Rs 5 cr domestic supplies and Rs 5 cr warehouse supplies falling under clause 8(a) of Schedule-III to CGST Act,2017.

Assuming that he paid GST of Rs 6 lakhs on office rent in a year, would it not be prudent to reverse Rs 3 lakhs ( as per Rule 42) attributable clause 8(a) of Schedule-III supplies?. It is reasonable to restrict common ITC on office rent in my view. Of course, the lawmakers have waived reversal of ITC on common goods and services in respect of other Schedule-III supplies. Please note that schedule-III supplies are not liable to tax under GST law falling under non-GST supplies read with exempt supplies. Personal views expressed.

rrkothapally rrkothapally 27/05/2023

 

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