Rule 42 of Central Goods and Services Tax (CGST) Rules, 2017 relates to  Manner of determination of input tax credit in respect of inputs or input services and reversal thereof. In this Article author tries to explain provisions of rule of 42 of CGST Rules 2017 with the help of Practical examples.

State where goods to be supplied by ABC Punjab
State where Cenvat of Input Tax to be accumulated Punjab
Input Taxes of which credit to be  accumulated Central GST, State GST &  Integrated Goods & Service Tax
Provisions of Rule 42  Example
(a)  total input tax involved on inputs and input services in a tax period, be denoted as ‘T’;  Tax Period  April’2018
 Amount of input tax involved in inputs (CGST)          2,45,00,000
 Amount of input tax involved in input services(CGST)        18,45,00,000
Total Input Tax as denoted as T     20,90,00,000
(b) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be used exclusively for purposes other than business, be denoted as ‘T1’; The amount of input tax of inputs and input services intended to be used exclusively for purposes other than business, be denoted as ‘T1’;             12,46,800
(c) the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be used exclusively for effecting exempt supplies, be denoted as ‘T2’; The amount of input tax of inputs and input services intended to be used exclusively for effecting exempt supplies, be denoted as ‘T2’;               1,56,780
d) the amount of input tax, out of ‘T’, in respect of inputs on which credit is not available under sub-section (5) of section 17 ( Negative list of Input Tax Credit) , be denoted as ‘T3’;  The amount of input tax, of inputs on which credit is not available under sub-section (5) of section 17, be denoted as ‘T3’;               4,80,160
e) the amount of input tax credit credited to the electronic credit ledger of registered person, be denoted as ‘C1’ and calculated as: C1=T-(T1+T2+T3)      20,71,16,260
(f) the amount of input tax credit attributable to inputs and input services used exclusively in or in relation to taxable supplies including zero rated supplies, be denoted as ‘T4’;  The amount of input tax credit of inputs and input services used exclusively in or in relation to taxable supplies including zero rated supplies, be denoted as ‘T4’;          2,15,60,780
(g) ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at the invoice level in FORM GSTR-2;
h) Input tax credit left after attribution of input tax credit under clause (g) shall be called common credit, be denoted as ‘C2’ and calculated as:  C2=C1-T4      18,55,55,480
C2 = C1- T4;
i) The amount of input tax credit attributable towards exempt supplies, be denoted as ‘D1’ and calculated as: Amount of input tax credit attributable towards exempt supplies ( D1)      15,75,215.64
D1= (E÷F) × C2
where : –
‘E’ is the aggregate value of exempt supplies, that is, all supplies other than taxable and zero rated supplies, during the tax period, and  Aggregate value of exempt supplies during the tax period        25,60,00,000
‘F’ is the total turnover of the registered person during the tax period Total turnover of the registered person during the tax period   30,15,60,00,000
(j) the amount of credit attributable to non-business purposes if common inputs and input services are used partly for business and partly for non-business purposes, be denoted as ‘D2’, and shall be equal to five per cent. of C2; and Amount of Tax Credit (D2)           92,77,774
(k) the remainder of the common credit shall be the eligible input tax credit attributed to the purposes of business and for effecting taxable supplies including zero rated supplies and shall be denoted as ‘C3’, where,- Amount of C3     17,47,02,490
C3 = C2 – (D1+D2);
(l) The amount ‘C3’ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax; Above mentioned process also apply for State GST & Integrated Goods & Service Tax also.
m) The amount equal to ‘D1’ and ‘D2’ shall be added to the output tax liability of the registered person:  Output liability of Tax Period  6,57,34,10,000
 Amount of D1           15,75,216
 Amount of D2           92,77,774
 Total Output liability of Tax Period   6,58,42,62,990
Disclaimer : In mentioned  example , figures & name of Company are notional.

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Bathinda, Punjab, IN
Member Since: 10 May 2018 | Total Posts: 2

My Published Posts

More Under Goods and Services Tax

6 Comments

  1. Aishwarya Satpute says:

    With regards to rule 42 of apportionment of ITC, if we are exporting goods which are already exempt, whether it is considered as exempt supply or taxable supply (because if we are exporting the goods it is considered as zero rated supply which are in turn are considered as taxable one) ???

    1. Abhishek Roy says:

      As per your information if the goods that you are supplying(Subject to Export) is an exempted/zero rated supplies as per EXIM Regulation, then it will be treated as Exempted/Zero Rated supply and the ITC Subject to such supply is ineligible and if you have taken the input in electronic credit ledger earlier if need to reverse the same.

  2. Aishwarya Satpute says:

    With regards to rule 42 of apportionment of ITC, if we are exporting goods which are already under exempt category, then for the purpose of Rule 42 whether it is consider as exempt supply or it is consider as taxable supply ( As if it is export then it is zero rate supply and for rule 42 zero rated supply is taxable supply )

  3. Kailash Joshi says:

    Whether reversal of ITC in respect of unsold flats by a builder on receipt of completion certificate is required to be done under Rule 42 of CGST Rules or there is some other procedure.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

September 2020
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
282930