The situations for ITC reversals are provided below- a) Availment of credit in relation to exempt goods or services b) Availment of common credit (ex-building rent, auditor fees) and supplying both taxable and exempt goods/services, then proportionate ITC in relation to exempt supplies shall be reversed c) others
reason: ex:100+18 rs invoice purchase is used to supply 50rs exempt and 50rs+9 taxable supplies. in such case you take 18 rs credit and pay 9rs to government. So government has placed the restriction
CAclubindia
