Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee
Law Related Issues
34. Exempt Supplies to include reverse charge supplies for credit apportionment
Explanation to Section 17(2) of CGST Act provides that for the purposes of this sub-
section, exempt supplies shall include supplies on which recipient is liable to pay tax on
reverse charge basis under subsection (3) of section 9.
Issue
Supplies on which reverse charge is applicable is an input service & cannot be used in pro-
rata formula for determining pro-rata credit between taxable & exempt supplies. Inclusion
of supplies (covered under RCM) into value of exempt supplies for the above purposes will
have effect of same supply being taxed two times. Such supplies being considered as
exempt seems to be illogical as such supplies are taxed, though tax has been paid by the
recipient instead supplier.
Suggestion
It is therefore suggested that supplies covered under reverse charge mechanism be kept
outside the ambit of exempt supplies for the purpose of proportionate credits.
Read Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee
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