Adjusted Total Turnover Computation

[Rakesh Jain]

'My Net ITC is already computed after the deduction as per Rule 42. Now, for refund calculation, am I again required to apply the proportionate formula by including exempted turnover in the adjusted total turnover? Wouldn't that amount to a double deduction?'

[Sadanand Bulbule]

Plz refer Rule 89[4][E] of the CGST Rules, which reads as under:

(E) “Adjusted Total Turnover” means the sum total of the value of-

(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and

(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

excluding the value of exempt supplies other than zero rated supplies during the relevant period

[Shilpi Jain]

This is a very big issue which comes to notice only when refund is filed.

Ideal way of doing this is to take entire credit in 4A5 in the monthly returns and then computing rule 42/43 reversal and then reversing it in 4B.

By this, when you are filing refund, you take ITC of 4A5 and do the computation.

AI Summary

Taxpayer challenges proportionate refund formula after Net ITC computation under Rule 42 as potential double deduction A taxpayer questioned whether applying the proportionate formula for refund calculation after already computing Net ITC under Rule 42 constitutes double deduction. One respondent cited Rule 89(4)(E) defining 'Adjusted Total Turnover' as including turnover excluding exempt supplies other than zero-rated supplies. Another respondent acknowledged this as a significant issue arising during refund filing, suggesting taking entire credit in monthly returns, computing Rule 42/43 reversal, then reversing it, so refund calculations use the original ITC amount with proper computation methodology.