GST Issue : Exempt Supplies to include reverse charge supplies for credit apportionment

By | October 6, 2017
(Last Updated On: October 6, 2017)

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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About CA Satbir Singh

Chartered Accountant having 12+ years of Experience in Taxation , Finance and GST related matters and can be reached at Email : Taxheal@gmail.com

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