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.

AI Summary

Input tax credit apportionment: apportion or reverse exempt share over 60 months with interest on reversals.
Rule 43 mandates turnover based apportionment of input tax credit on capital goods used for both taxable and exempt supplies; if full ITC is availed it must be reversed for the exempt proportion over a 60 month period with interest. Alternatively, taxpayers may claim only the taxable use proportion initially without penalty if the claim is correct. Excess ITC must be self reversed with interest and ITC availment should be certified annually by a cost accountant. Under claiming may risk forfeiture of subsequently discovered additional entitlement, although some argue no time limit exists to re avail credit.