Question 28 - What would happen to the input tax credit availed by a registered person who opts for composition scheme or where the goods or services or both supplied by him become wholly exempt?
Input tax credit reversal required when a taxpayer opts for composition or supplies become wholly exempt, requiring payment or lapse. When a registered person opts for the composition scheme or supplies become wholly exempt, they must pay an amount equal to the input tax credit in respect of stocks held on the day immediately preceding the option or exemption date; for capital goods the payable amount is reduced by a prescribed percentage. Payment may be made by debiting the electronic credit ledger if sufficient, or by debiting the electronic cash ledger; any remaining balance in the credit ledger lapses.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Input tax credit reversal required when a taxpayer opts for composition or supplies become wholly exempt, requiring payment or lapse.
When a registered person opts for the composition scheme or supplies become wholly exempt, they must pay an amount equal to the input tax credit in respect of stocks held on the day immediately preceding the option or exemption date; for capital goods the payable amount is reduced by a prescribed percentage. Payment may be made by debiting the electronic credit ledger if sufficient, or by debiting the electronic cash ledger; any remaining balance in the credit ledger lapses.
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