reversal of common input credit used for both taxable and non taxable supplies

[rao rao]

As per 42 of CGST 2017 common input credit used for both taxable and non taxable supplies should be reversed. I want know whether credit can be availed after deducting the items mentioned in Rule 42 or it must be reversed after taking credit in GSTR 3B and then only reversed.

[Ganeshan Kalyani]

Sir, first you have to show all in table 4(A) and then show reversal in table 4(B) of GSTR 3B.

[Shilpi Jain]

Yes agree. However in case this kind of disclosure was missed you can make an intimation to dept else rectify the disclosure while filing GSTR-9 annual return

[Atul Mehrotra]

Dear Experts.

What would be the practical implication if a registered person avails net ITC i.e. the eligible portion without following the procedure laid down in rule 42?

[Ganeshan Kalyani]

The department would understand by referring what is furnished in the return. Then you have to justify that this is the net input tax credit. In my view, it is only procedural method and do not amount to non-compliance.

[Shilpi Jain]

Agree with Mr. Ganesh. Procedural aspects can be condoned and should not be leading to greater consequences.

[KASTURI SETHI]

Sh.Rao Rao Ji,

I think you are talking about maintenance of separate account for taxable and non-taxable supplies for the purpose of ITC.

In Section 17 of the CGST Act, 2017 as well as Rules 42 and 43 of the CGST Rules, 2017, there is no provision for exercising option like maintenance of separate account or payment of an amount of six or seven per cent of the value of exempted supplies, as it existed under erstwhile Rule 6 of Cenvat Credit Rules, 2004. Such option/provision in Central Excise era was omitted vide Notification No.13/2016-C.E. (N.T.) dated 1-3-2016 because practically it was not viable.

AI Summary

Reversal of common input credit must be reported as deduction and reversal in returns, with rectification available in annual return. Where inputs are used for both taxable and non taxable supplies, the portion attributable to non taxable supplies must be reversed in the return by disclosing total input credit and then showing the reversal/deduction in the prescribed return fields; omissions may be remedied by intimation or correction in the annual return, and procedural deviations can be explained rather than treated as substantive disallowance.