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Query Answer
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Sir,

Please help for following query in GST

Our client is engaged in 2 services 1. Housekeeping and 2. Sale of Uniform

Both the supply made to the government.

Now the 1st service is exempt from GST as it is labour service only to the government.

and Sale of uniform is taxable service @12%

Now my Question is if he incurred admin exp [like purchase of computer accessories, Printing of Diaries etc.] then he can avail the ITC of the same against taxable Services, If yes, then How Much?

Reply

Dear Sir,

Where common taxable inputs and/or services are used for making both taxable and non-taxable/ exempt supplies then the quantum of credit on such inputs/input services is restricted to the credit attributable to taxable supplies.  In other words the total credit will be subject to pro-rata reversals i.e. reversal in proportion to value of non-taxable/exempt supplies. (see Rule 42 of the CGST Rules, 2017 for computation of credit in this case).

As your client is engaged in both exempted  as well as taxable supply under GST, he can only avail the proportional amount of ITC attributable to taxable supplies.

The portion of ITC pertaining to exempted supplies is calculated by the following formula:

ITC pertaining to exempted supply=     Exempted turnover X common credit

                                                              Total turnover

The formula calculates the amount by the proportionate method. Such amount is deemed to be the amount of ITC pertaining to exempted supplies and the assessee can not avail the benefit from it.
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