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

Reversal of input tax credit: monthly apportionment and an annual recomputation govern adjustment and remedy for excess reversals.
This note concerns the statutory mechanism for reversal of common input tax credit by reference to the ratio of exempt turnover to total turnover, the coexistence of monthly apportionment and a binding annual recomputation finalised by the September return, and whether annual recomputation requires recalculation of each month's reversal or may be effected by applying a single annual ratio, plus consequences when the September adjustment opportunity has passed.