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

Adjusted Total Turnover excludes exempt supplies, impacting refund ITC; report full ITC then apply Rule 42/43 reversals.
Rule 89(4)(E) defines Adjusted Total Turnover as including turnover in a State/Union territory and zero-rated/non-zero-rated services while excluding the value of exempt supplies other than zero-rated supplies for the relevant period. To prevent double deduction in refund claims, practitioners should record full ITC in 4A5, compute required reversals under Rule 42/43, and reflect those reversals in 4B so the refund computation uses the gross ITC adjusted by the mandated reversals.