Query about rule 42

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45 Points Joined September 2022
If I have exempt supply in only month of February and March along with taxable supply do I have to reverse itx according to rule 42 for entire year or only for the month in which I made exempt supply.
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On 15 May 2025 at 23:08 Report
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Master in Accounts & high court Advocate
9505 Points Joined December 2011

According to Rule 42 of the CGST Rules, 2017, you need to reverse the Input Tax Credit (ITC) only for the months in which you made exempt supplies, not for the entire year. Reversal of ITC -

*Monthly Reversal*: You should calculate the ITC reversal for each month separately, based on the exempt supplies made during that month. -

 *Formula-Based Reversal*: The formula for calculating the reversal amount is specified in Rule 42, which takes into account the total exempt supplies and total turnover for the month. Key Considerations -

 *Record-Keeping*: Maintain accurate records of exempt supplies and taxable supplies for each month to ensure correct calculation of ITC reversal. -

*Monthly Calculation*: Calculate the ITC reversal for each month separately, rather than annually. - 

*Compliance*: Ensure compliance with Rule 42 and other relevant GST regulations to avoid any potential issues or penalties.

 By following these guidelines, you can correctly calculate and reverse ITC for the months in which you made exempt supplies.

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On 16 May 2025 at 12:28


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