REVERSAL PROPORTIONATE ITC

This query is : Resolved

Suresh S. Tejwani (Querist)
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10 April 2026 A capital asset is purchased for use in both taxable and exempt supplies. There were no exempt supplies for the initial few months after purchase, but exempt supplies were made later. While calculating proportionate ITC reversal, should the calculation consider the entire period from the date of purchase, or only the months in which exempt supplies were made?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
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10 April 2026 You don’t escape ITC reversal just because exempt supply came later — GST tracks usage, not timing. • ITC on capital goods is spread over 60 months
• No reversal until exempt supply begins
• Once it begins → proportionate reversal starts
• Calculation is based on full ITC lifecycle, not limited months
As per Rule 43 of CGST Rules, ITC on capital goods is spread over 60 months. Reversal is required only from the month exempt supplies commence, but the calculation is based on the total ITC apportioned over the entire useful life. Hence, it is not restricted only to months of exempt supply, but computed using monthly common credit (ITC ÷ 60).

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