Rule 43 - Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

Rule 43: How to attribute and reverse input tax credit on capital goods partly used for taxable and exempt supplies

Rule 43 prescribes attribution and reversal of input tax credit on capital goods partly used for business, taxable and exempt supplies. Credit for goods exclusively for exempt or non-business use is disallowed; goods exclusively for taxable (including zero-rated) supplies are credited. For other capital goods, invoice tax ('A') is credited and treated as common credit ('Tc') with useful life five years; monthly common credit ('Tm') equals Tc/60. Exempt-attributable credit ('Te') is calculated by (E/F)×Tr (with project-specific rules for real estate) and added to output tax with interest each period. Final project-level adjustment (Tefinal) reconciles periodical reversals/claims on completion, with separate computation for central, state, UT and integrated tax and allocation rules where goods serve multiple projects.