Rule 42 computation

[Vs Murthy]

As pr section 17 (2) -Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Please refer the use of registered person in this section implying that if in a GST registration, both exempt and taxable supply exist , then rule 42 needs to be applied.

It is pertinent to note that rule 42 of CGST Rules, 2017 allows a registered person to avail
complete credit of taxes paid where the same is used only for effecting a taxable supply, in such scenario, while calculating total turnover for the tax period , do the need to exclude turnover for which exclusive credit is available?

AI Summary

Clarification on Rule 42: Include both taxable and exempt supplies in total turnover for input tax credit calculation. A discussion on a forum addressed the application of Rule 42 under the GST framework, focusing on the treatment of input tax credit when goods or services are used for both taxable and exempt supplies. The query raised whether turnover for which exclusive credit is available should be excluded when calculating total turnover for a tax period. The responses clarified that all common credit should be considered, and the total turnover must include both taxable and exempt supplies, aligning with the interpretation of Rule 42 of the CGST Rules, 2017.