As the due date for filing GST returns for the month of September draws nearer, one should keep in mind the various points relating to FY 2018-19 for which the due date of filing the return for September is the last date. While availing any input tax credit relating to FY 2018-19 not claimed yet and reconciling the GST returns vis-à-vis the books of accounts seems most imperative, many seem to overlook the fact that ITC reversal for the FY 2018-19 in case the supplier is utilizing common credit for providing taxable and exempted services also needs to be finalized upto the same date.
As per the provisions of Section 17 of the CGST Act, 2017 (‘Act’), a supplier utilizing goods and services on which ITC has been availed for the purpose of providing both taxable and exempted supplies has to reverse certain portion of input tax credit. This common credit has to be reversed in the proportion which exempted turnover bears to the total turnover.
For the purpose of calculation of exempted turnover, the definition of exempted supply as per the provisions of Section 2 of the Act must be referred. The same is given below:
(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;
Further non-taxable supply is defined as follows:
(78) “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;
A perusal of the above may give an interpretation that all transactions which are not chargeable to tax under the Act may be included in the calculation for exempted turnover. This might be true for most of the cases but not all. Certain transactions have been specifically held to be included or not to be included in the calculation for exempted turnover. The list of the same is given below:
It can be seen from the above that the specific exclusions and inclusions must be kept in mind while calculating the exempted turnover and interpreting the term ‘exempted turnover’ as per common parlance may not give results in accordance with the provisions of the Act.
(The author is a practicing Chartered Accountant based in Delhi and can be reached at firstname.lastname@example.org or 9811933762)
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