Question ID : 40708

ITC Reversal

A & Co, a proprietary concern having GST registration in the State of Tamilnadu. A&Co is an authorized distributor of various products manufactured and sold by XYZ Ltd. During the financial year 2019-2020, A&CO purchased materials worth Rs. 25 Crores with GSTof 18% from XYZ Ltd. A&CO took entire GST amount as Input based on satisfaction of all conditions of ITC. Now as per agreement, A&CO at the end of year received turnover discount (TOD) of say Rs. 1 crore from XYZ Ltd. XYZ Ltd issued a credit note for the TOD without GST and A&CO accounted for the same as other income without giving any impact of GST. The query I have is, Whether A&CO is required to do ITC reversal as per rule 42 of CGST rules 2017, considering TOD as exempt or non-GST income. As this income is directly related to purchases and ITC being claimed fully when purchases were made. Appreciate if you can give your humbled opinion on whether A&CO should carry out ITC reversal for this TOD (exempt Income) based on Rule 42 of CGST Rules 2017. In case your view is no ITC reversal then can you give reasoning for the same. Thanks, CA. Amith Khadloya

Answer ID : 80600

Please refer Circular No. 92/11/2019-GST dated 7th March, 2019 - there is no need to reduce ITC if a commercial credit note is raised. Hope the Circular will help. Further you may also refer Circular No. 105/24/2019-GST dtd 28.06.2019

Answer ID : 80607

Thank you Sachinji

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