Rule 42 ITC reversal

[Rekha Arya]

There is a proviso in rule 42 -

Provided further that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of E/F‘ shall be calculated by taking values of E‘ and F‘ of the last tax period for which the details of such turnover are available, previous to the month during which the said value of E/F‘ is to be calculated.

In my case , suppose I raise Exempt Invoice annually say for eg. November 2021 and during that month exempt to total turnover ratio is 95%.

In other month during FY 2021-22 there is no exempt turnover but there is taxable turnover. So whether proviso to rule 42 will apply and for all months ITC to be reversed at 95% even when at annual level ratio comes at 60%?

AI Summary

GST Forum Clarifies Rule 42: ITC Reversal Calculations Must Include Both Monthly and Annual Turnover for Accuracy A discussion on the Goods and Services Tax (GST) forum addresses the interpretation of Rule 42 regarding Input Tax Credit (ITC) reversal when there is no turnover during a tax period. A user queries whether the rule applies when exempt turnover is recorded annually but not monthly, affecting the ITC reversal percentage. Responses clarify that ITC should be calculated both monthly and annually, with adjustments made by September following the financial year. The consensus is that annual recalculations will balance monthly turnover variations, ensuring accurate ITC adjustments.