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Question ID : 38090

Reversal of ITC under rule 42 wrt tax paid on reverse charge

A private Limited paid GST under reverse charge wrt import of service from its parent company. The total GST paid on import of service is Rs 1,00,000 and subsequently claimed ITC. As per rule 42, the ITC is to be reversed wrt exempt suppy. As per section 17(3), the GST paid on reverse charge is exempt supply. So, does it mean the entire GST paid of Rs 1,00,00 on this transaction we have to reverse it. Kindly confirm the same. Thanx in advance

Posted by CA Neha Gupta on Apr 12, 2019

Filed Under GST

Answer ID : 76495

Yes if the amount is identifiable it has to be reversed in full . otherwise this formula can be used:

Posted by CA. BISHT RAKESH on Apr 13, 2019
Answer ID : 76510

Section 17(3) restriction covers a supply where the GST has been paid by the recipient, and the restriction would be applicable in the hands of the supplier (as exempt supply) and not the recipient. Examples are GTA, Advocates etc. In case of GTA where the recipient has paid GST under RCM, restriction on ITC under Section 17(3) would be applicable on the GTA. In your case, Section 17(3) restriction would not be applicable, provided your outward supplies are fully taxable under GST.

Posted by Vikram Katariya on Apr 21, 2019