Input tax credit apportionment requires proportionate reversal for exempt supplies under CGST law, reducing eligible credit accordingly.
Section 17(2) of the CGST Act requires that where supplies are partly for taxable and partly for exempt purposes, input tax credit must be restricted to the portion attributable to taxable supplies. If inputs are separately identifiable, credit attributable to exempt supplies is disallowed; if not, the proportionate reversal formula applies: (Total Input Tax x Value of Exempt Supplies) / Total Turnover, with the reversed amount blocked and the remainder available as eligible credit. (AI Summary)