Reversal of ITC of inputs/input services/capital goods used for effecting exempt supplies or for non-business use
Rule 42: Manner of determination of input tax credit in respect of inputs or input services and reversal thereof
Working of C2, D1 and D2
1. Working of Common credit:
|Gross amount on tax charged on inputs/input services||xxxxx||Gross tax amount in respect of inputs/input services procured|
|Less:||Ineligible credit as per Sec 17(5) rent a cab, works contract etc.||xxx|
|Less:||Tax component on goods and services exclusively used for effecting exempt suplies||xxx||Can be identified separately|
|Less:||Tax component on goods and services exclusively used for non-business use||xxx||Can be identified separately|
2. Working of common credit attributable to exempt supplies (D1):
|Value of exempt supplies||xxxx||Exempt supplies defined in Sec 2(47)|
|Add:||Value of outward supplies on which recipient is liable to pay tax under reverse charge mechanism||xxx||This is for GTA, Legal consultants etc. who has to include
this value while arriving at exempt supplies value
|Add:||Sale of land||xx|
|Add:||Sale of Building||xx||If the same is not subject to GST as per Para 5(b) to Schedule II to CGST Act. Sale of building subject to GST only when any amount received by builder before issuance of completion certificate|
|Aggregate value of exempt supplies||xxxx|
3. Working of common credit attributable to supplies used in non –business use (D2):
Now, when we are able to calculate C2, D1 and D2, we can use the above formula i.e. C2- (D1+D2) to calculate the C3 – Final ITC to be taken removing the ITC attributable to exempt/non business use supplies.
Point to be noted:
1. This C3 has to be calculated separately for CGST, SGST, IGST and UTGST.
This is only to be done for complying with Rule 42.
Rule 43: Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases.
[In short, the above formula will give us the ITC on common capital goods to be reversed as attributable to use for exempt supplies or/and for non-business use)