Any reduction in ITC must arise under section 17 and this 1/3rd reduction in value that is explained in note 2 below the Notification 8/2017-Integrated Tax (Rate) dated June 28, 2017, it is not stated to be an ‘exempt supply’ for the purposes of section 17.
As such, though it appears logical to reverse ITC, there is no machinery provision to require this reversal of ITC.
(ICAI FAQ PUBLICATION 06-09-2017 : Exemptions on Supply of Services – FAQ NO. 36)