Question 1

How is ITC allocated between export and domestic revenue?

Accepted Answer

ITC is proportionally allocated based on your export vs domestic revenue ratio. For example, if 80% of your revenue is from exports, 80% of your ITC is attributable to exports (eligible for refund) and 20% to domestic (used to offset GST liability). This proportional allocation ensures fair treatment of mixed-revenue businesses.

Question 2

What is blocked ITC and why does it occur?

Accepted Answer

Blocked ITC occurs when you cannot utilize or claim refund for some portion of your Input Tax Credit. This happens due to: (1) items specifically blocked under GST law (food, motor vehicles for personal use), (2) ITC on mixed-use items without proper apportionment, or (3) ITC lapsed due to non-compliance with timelines. Minimize blocked ITC by proper categorization and timely claims.

Question 3

What is a good ITC utilization rate and how can I improve it?

Accepted Answer

An ITC utilization rate above 80% is considered good. To improve: (1) Increase export percentage to claim more refunds, (2) Ensure all expenses are properly documented with GST invoices, (3) Verify supplier GSTIN compliance, (4) File refund claims within 2-year deadline, (5) Reconcile ITC monthly with GSTR-2B to catch discrepancies early.

Question 4

How do I claim ITC refund for export services?

Accepted Answer

File RFD-01A on the GST portal within 2 years from the relevant date. Required documents: Tax invoices, export invoices, FIRC/e-BRC for forex receipt, LUT copy, and shipping bills (for goods). The refund is processed after verification by the GST officer. Processing time is typically 30-60 days for properly filed claims.

Question 5

What expenses are NOT eligible for ITC claim?

Accepted Answer

ITC is blocked on: (1) Food and beverages (unless in hospitality business), (2) Motor vehicles (unless for specified purposes), (3) Rent for residential property, (4) Construction of immovable property (except plant and machinery), (5) Personal consumption, (6) Goods/services used for exempt supplies. Keep these categories separate in your accounting.

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