Site navigation

A registered supplier makes a supply that is zero-rated and would otherwise be exempt. Under section 16(2) of the Integrated Goods and Services Tax Act, 2017, may the supplier avail input tax credit…

Question and options

A registered supplier makes a supply that is zero-rated and would otherwise be exempt. Under section 16(2) of the Integrated Goods and Services Tax Act, 2017, may the supplier avail input tax credit for making it?

  1. Yes, subject to the blocked-credit list in section 17(5) of the CGST Act

  2. No, unless the zero-rated supply is an export of goods and not of services

  3. Yes, but only where integrated tax is paid on the supply instead of using a bond

  4. No, as credit for exempt supplies must be reversed under section 17(2) of the CGST Act

Answer and explanation

Correct answer: A - Yes, subject to the blocked-credit list in section 17(5) of the CGST Act

Section 16(2) of the IGST Act, 2017 allows input tax credit for making zero-rated supplies even though such a supply may be an exempt supply, subject to the blocked credits in section 17(5) of the CGST Act. The reversal rule in section 17(2) of the CGST Act, which is the tempting choice, is displaced for zero-rated supplies by this provision. Credit is available whether the supplier exports under a bond or letter of undertaking or on payment of integrated tax, and for services as well as goods.

Practice for these exams

Related exam syllabi

More solved explanations in GST - levy, supply, input tax credit, registration & returns