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INPUT TAX CREDIT

30 May 2018

If I have exempt supply of rs. 50 & taxable supply of rs. 50 in a april month & have ITC of rs. 10 in april month, then how much ITC can I utilise?
Can I carry forward any balance ITC(if any) to next month?

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9 Replies

A B Kundu (Professional) (1422 Points)
Replied 30 May 2018

ITC of Rs.10 shall be set off with your liability for taxable supply. Any unadjusted ITC shall be carried forward for setting off in the future months' liabilities.

RAJA P M ("Do the Right Thing...!!!") (127196 Points)
Replied 30 May 2018

Yes... I agreed to Mr A B Kundu.,

And the same thing,
If You are purchased taxable goods and After Your process the Outward supplies is Exempt supply then You can't avail ITC benefits for the Purchase...

arjun goyal (77 Points)
Replied 30 May 2018

I will not do proportionate distribution of ITC?

A B Kundu (Professional) (1422 Points)
Replied 30 May 2018

I think I was wrong. If you have ITC which was exclusively used for providing exempt supply, then for such amount you can't claim credit. Further, in case of common credit, means ITC on product which has been used for providing both taxable and exempted supply, you have to reverse the credit in the proportion of turnover of the exempted supply.

arjun goyal (77 Points)
Replied 30 May 2018

But as per 17 of CGST act, if we have taxable & exempt supplies , then amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies.

A B Kundu (Professional) (1422 Points)
Replied 30 May 2018

Yes, you are correct.

CA Sunil Kumar (Chartered Accountant) (4514 Points)
Replied 30 May 2018

ITC on input supplies partly used for business and partly for exempt supplies –

Amount in terms of rule 42(1)(m).

The ITC used for exempt supplies has to be reversed.

How to Calculate ITC reversal on Exempt Supplies –

Step 1 – Calculate Common Credit

Common Credit = Total ITC on Input Supplies

(less) ITC on supplies used for providing exempt supplies

(less) ITC on supplies other than exempted but including zero rated supplies (ITC on normal supplies)

In simple words, Common Credit is ITC on inputs partly used for exempt supplies or personal use.

Step 2 – Amount of reversal of input tax credit attributable to inputs partly used for Exempt supplies

= (Value of Exempt Supplies * Common Credit) / Total Turnover in the State

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arjun goyal (77 Points)
Replied 30 May 2018

ya..now u r ri8..
If I am rice miller & I have taxable purchase of raw material & after processing such raw material I have some outward exempt supplies & some outward taxable supplies, then how I will allocate the ITC?