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

Debate on Input Credit Reversal Under GST: Rule 42 Compliance and GSTR 3B Reporting Procedures A forum discussion centered on the reversal of common input credit under GST, specifically concerning the use of credit for both taxable and non-taxable supplies as per Rule 42 of the CGST Act, 2017. Participants debated whether credit should be availed after deducting specified items or reversed after taking credit in GSTR 3B. Responses suggested showing all credits in table 4(A) and reversals in table 4(B) of GSTR 3B, with some emphasizing procedural compliance. It was noted that procedural lapses could be rectified in the GSTR-9 annual return, and the importance of maintaining separate accounts for taxable and non-taxable supplies was highlighted.