My client sells both taxable and exempt finished goods. Plz guide how to reverse itc used to make both taxable and exempt supply with example
Reply
As per Section 17(2) of CGST Act, 2017, where input are used for both taxable as well as exempted goods, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies. The credit that is attributable to exempted supplies must be reversed
For example suppose—
Total input tax credit available is Rs. 1,20,000/-
Taxable outward supply—Rs. 7,50,000/-
Exempted outward supply—Rs. 5,00,000/-
As per Rule 42 of CGST Rules, 2017 calculation of eligible ITC is as follows—
ITC pertains to exempted supply= Exempted turnover x common credit
Total Turnover
Rs. 48,000/- = 5,00,000/12,50,000 x 1,20,000
Therefore, eligible ITC in your case is Rs. 72,000 (1,20,000 - 48,000). So the taxpayer has to reverse ITC of Rs. 48,000/- in GSTR-3B in the column of ITC reversal under Rule 42. |