My outward supply includes both exempt and taxable supply and inputs which is used in both supplies is a taxable good, now question is that whether I am eligible to take full input tax credit or in any proportion?
Details of total sale and purchase is as follows—
Total Purchase—Rs. 10,00,000
Input tax on purchase—Rs. 1,20,000
Total Sale—Rs. 12,50,000 [out of which 7,50,000 is taxable supply and 5,00,000 is exempt]
Output GST—Rs. 90000
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
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
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.
By doing this Rs. 30,000 ITC balance will remove.