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

ITC reversal: apportionment must use total exempt turnover, including supplies from capital goods without earlier ITC.
Reversal of input tax credit for mixed supplies must be computed by reference to the registration's total exempt turnover. Exempt supplies generated from capital goods on which ITC was not earlier availed are nevertheless included in the exempt turnover for purposes of computing common credit reversal; there is no provision to exclude turnover traced to specific capital goods when applying the prescribed apportionment rules.