REVERSAL IN ITC IN GST REGIME

[Guest]

Respected Sirs,

My Client are providing Transportation/Vehicle (Trailer) hire Service. Some Trailers are used for Taxable Supplies, Some Trailers are provided to GTA (which was Exempted as GTA to GTA Transacction),Some Trailers are provided to SEZ Developer (Supply to SEZ without payment of Tax by filling of LUT).

My query is in above case, how to reverse the ITC Creditwhich was fully taken generally on Spare Parts, Repairs, Manpower (Drivers) and on vehicle itself, as it was run for Taxable,Exempted and also in NIL Rated Supply

kindly guide on the same

Thanks

[DR.MARIAPPAN GOVINDARAJAN]

There is a formula for this calculation in the rules.

[Guest]

But what about credit already taken on capital goods?

It may happen in future, after completing work order of SEZ or exempted work, vehicle will be used for taxable work.

In this case, what to do with ITC already taken on Capital Goods?

[KASTURI SETHI]

No reversal is required for supply to SEZ unit. For remaining portion of reversal, formula has to be deeply studied as advised by Dr. Govindarajan, Sir.

[Ganeshan Kalyani]

The common credit on capital goods to be taken on proportionate to taxable output. It is done based on turnover ratio. The common credit has to be taken over a period of 5 years assuming the life of an asset to be of five years.

AI Summary

Input Tax Credit reversal: use proportionate statutory formula; SEZ supplies under LUT exempt from reversal; capital goods apportioned. Where trailers and related inputs are used for taxable, exempt and SEZ supplies, a statutory formula governs reversal of Input Tax Credit; supplies to an SEZ under LUT do not require reversal. Capital goods and common credits must be apportioned to taxable use using a turnover-ratio method and allocated over the asset's recognised useful life in accordance with the GST compliance framework.