Reversal on capital goods

[Rajesh Kumar]

Respected experts

A TP purchased capital goods in 2017-18 and supplied exempted services. He didn’t avail ITC on that capital goods. Later on , he started to supply taxable supply along with exempted supply. He also purchased more capital goods and availed ITC thereof.

Now, the calculation for the reversal on common ITC under Rule 42 & 43 to be done.

Please guide whether turnover of the supplies done by the capital goods on which ITC was not availed to be considered to calculation. OR Common ITC can be reversed based on the only turnovers done by the capital goods on which ITC availed.

AI Summary

Should Turnover from Non-ITC Capital Goods Be Included in ITC Reversal Under GST Rules 42 & 43? A taxpayer purchased capital goods in 2017-18 for exempted services without availing Input Tax Credit (ITC). Later, they began supplying taxable goods and availed ITC on new capital goods. The query concerns whether the turnover from capital goods without availed ITC should be included in the ITC reversal calculation under GST Rules 42 and 43. Respondents advised that common credit should be reversed based on total exempt supply turnover, not just those from capital goods with availed ITC. It was suggested to consider the entire registration turnover, referencing Rule 42 & 43 and Section 18(1)(d) of the CGST Act, 2017.