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?

[Shilpi Jain]

U will consider all common credit. However in total turnover u will have to consider entire turnover irrespective of whether it is a taxable or exempt supply

[KASTURI SETHI]

I concur with the views of Madam Shilpi Jain.

AI Summary

Input tax credit apportionment: total turnover for apportionment must include all supplies, taxable and exempt. Section 17(2) restricts input tax credit to the portion attributable to taxable supplies while Rule 42 allows full credit for inputs used exclusively for taxable supplies. For apportionment purposes, all common credit is to be considered and total turnover must include entire turnover, irrespective of whether supplies are taxable or exempt; turnover for which exclusive credit is available is not excluded from the turnover base.