Input Tax Credit reversal on Sale of Shares/Mutual Funds

• January 5, 2021
• CA Chandan Agarwal's Office

Background:

In GST regime as well as in the previous regime, ITC on exempted supply of goods or services shall be reversed and not eligible for availment. One such exempted supply is sale of shares/mutual funds. ITC reversal on such supply is discussed as below:

Legal Provisions:

ITC restriction on exempt supply:

Section 17(2) & 17(3) of CGST Act provides that when goods or services or both are used partly for the purpose of effecting taxable supplies and partly for effecting exempt supplies, the amount of credit shall be restricted and allowed only for the input tax that is attributable to the taxable supplies. Also, the ITC proportionate to the exempt supply shall be reversed.

Read more on: https://taxguru.in/goods-and-service-tax/input-tax-credit-reversal-sale-shares-mutual-funds.html