Reversal of Input Tax Credit on switching to composition scheme; capital goods credit prorated by remaining useful life.

Switching to the composition scheme requires reversal of Input Tax Credit on inputs, inputs in semi finished or finished goods held in stock, and capital goods held in stock as on the day before the option is exercised, by payment from the electronic credit or cash ledger after prescribed reductions. For capital goods, reversal is prorated by remaining useful life using an assumed five year useful life, with the credit attributable to remaining months computed as original credit multiplied by remaining months divided by sixty.

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