Reversal under rule 42 of CGST Act

[Manali Daiya]

Dear Experts,

Request your views on the following

As per Rule 42(1), there is requirement of monthly reversal of common credit in the ratio of exempt turnover to total turnover. However, as per rule 42(2), the reversal is required to be computed annually and if there is any variation between annual and monthly numbers then, the same is either required to be reversed or recredited by September month following the end of the financial year.

Query

1. Whether recomputation of number annually are required to be done on annual nos or just recomputation of monthly numbers after factoring in any changes during the year?

2. What is the way out if there is excess reversal as per monthly calculation and time limit to reclaim the credit i.e. september month has lapsed.

Thanks

AI Summary

Debate on GST forum over ITC reversal: Should recomputation use annual or adjusted monthly figures as per Rule 42? A discussion on the Goods and Services Tax (GST) forum addresses the reversal of input tax credit (ITC) as per Rule 42 of the CGST Act. The query involves whether annual recomputation should be based on annual or adjusted monthly figures and the procedure if excess reversal occurs after the September deadline. Responses suggest annual figures should guide recomputation and highlight the challenges of reclaiming credit after the deadline. A participant mentions reversing credit based on annual figures instead of monthly, as required by the department, and seeks clarification on the department's interpretation of Rule 42(2).