Can reversal be done on segment wise.
for example
I have 3 segments
segment 1- 100% taxable sale
sale value 10 lakh
Input 50 k
segment 2-100% exempt sale
sale value 10 lakh
and no input is taken of this segment
segment 3- both taxable and exempt sale
total sale value 10 lakh of this 7lakh taxable and 3 lakh exempt
Input 50 k
Reversal= 50k*3lakh/10lakh
or
50k*3lakh/30lakh
Menu
Reversal under section 42 and 43 of cgst Act
Replies (1)
| Yes, segment-wise treatment is the correct and logical approach, and aligns with how Rule 42 works in principle: 1. Rule 42 Mechanism: ITC reversal is required only on inputs/input services used for exempt supplies. If you can establish direct attribution of inputs to specific segments, reversal is only for the exempt-use portion. 2. Direct Attribution (First Step): Under Rule 42(1)(a) and (b), inputs exclusively used for taxable supplies → full ITC allowed. Inputs exclusively used for exempt supplies → full reversal required. So for your Segment 1 (100% taxable), no reversal. For Segment 2 (100% exempt), full reversal of ITC attributable to that segment. 3. Common Credits (Second Step): For Segment 3 (mixed), the common ITC needs to be split in proportion of exempt turnover to total turnover — this is the pro-rata reversal formula under Rule 42(1)(c) to (f). 4. Documentation is Key: You need a solid cost/purchase attribution system to demonstrate which inputs go to which segment. If attribution is clean and auditable, segment-wise reversal stands. If not, the officer may apply blanket proportionate reversal to all ITC. 5. Section 42/43 Reference: The question refers to old provisions (pre-GST era provisions have been restructured) — under current law, the relevant provisions are Rule 42 and Rule 43 of CGST Rules for inputs/capital goods respectively. Segment-wise reversal is acceptable if supported by records. |
Recent Topics :
- SUPPLEMENTARY AGREEMENT FOR ADDING A PARTER IN TN
- Part availmement of ITC in case of rejection of su
- Due date for itr 5 no audit with loss for fy 25 26
- Capital Gains Mismatch AIS
- Inward E-way bill from Tally Prime 7.1
- Query regarding exemption under Section 10(10AA) &
- NPO registered under sec 8 itr filing
- Form 144 (Earlier 27Q) – Reason Code (A/C/G/
- Nps taxation
- Representative assessee
Related Topics :
CAclubindia
