Rule 43 capital Goods

[KARAN VERMA]

Sir, as per Rule 43 if capital goods used for both taxable and exempt supply of goods, then firstly take full amount input credit in 3B return, then reverse in 60 months with turnover ratio of exempt/total sale with interest.

My question is if I m claiming only proportionate ITC as per taxable sale ratio instead of full credit, then whether there is any non compliance of rule 43.

I mean if ₹ 100000 ITC and 40% is taxable sale, then I m claiming only ₹ 40000 ITC in 3B instead of full amount.

If I m doing above whether department levy any penalty on me.

[KASTURI SETHI]

No possibility of penalty in such situation provided that ITC availed is correct. After completion of the year, you should reverse the credit along with interest on our own, if ITC is utilized in excess. Availment of ITC must be certified by Cost Accountant every year.

[KARAN VERMA]

Thank you Sir, one more question regarding this

If I avail full ITC and then reversed in GSTR-3B return till 60 months, whether I have to pay interest every month on reversal amount of input.

[Shilpi Jain]

If I avail full ITC and then reversed in GSTR-3B return till 60 months, whether I have to pay interest every month on reversal amount of input - YES

Further, regarding reversal of credit agree with Kasturi sir that excess availment will require reversal with interest. Though considering the interest cost involved in 60 months reversal you could consider availing the estimated credit initially.

Another aspect is, in case you avail lesser ITC, i.e. say you estimated 40% to be taxable, but when you recompute the credit as per rule 43 you have noted that you were eligible for 50% credit, then the remaining 10% you may not be eligible as the time would have lapsed.

Though another possible view is that there is no time limit for re-availing of credit and hence this should also be possible to avail later.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of both experts.

AI Summary

Rule 43 GST: Proportionate ITC Claim for Capital Goods in Mixed Supplies Discussed; No Penalty If Correctly Availed A discussion on Rule 43 of the Goods and Services Tax (GST) addresses the treatment of input tax credit (ITC) for capital goods used in both taxable and exempt supplies. The query raises whether claiming proportionate ITC based on taxable sales, instead of full credit, constitutes non-compliance. Responses indicate no penalty if ITC is correctly availed, advising annual certification by a Cost Accountant. Full ITC can be claimed and reversed over 60 months, with interest applicable on the reversal amount. It's noted that estimating ITC initially may avoid interest costs, and there's debate on the time limit for re-availing credit.