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Rule 43 of GST Act for ITC Reversal 5%

11 May 2020

Dear Friends, Anyone can assist me the below points;

1) If you capitalise including gst portion and claim depreciation on that you are not entitled to input credit
2) If you don’t capitalise the gst portion you can credit the total amount to the electronic credit ledger.
Can you please give me the reference to the gst act or rules for 5% reversal

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3 Replies

Tushar Makkar (81 Points)
Replied 11 May 2020

Hi

please elaborate your question. What is ur question it is confusing

1 Like

Mohanraj J (1162 Points)
Replied 11 May 2020

We take ITC for all CAPEX. In this case we need to reversal 5% GST annually as per Rule 43 of GST Act ????. If we capitalized GST amount also, then we no need to reversed 5%. Which one is true and more benefits for company???

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CA Haritha Komma (Chartered Accountant) (1147 Points)
Replied 12 May 2020

Sir..

For Eg: Basic value = 100 + GST = 18 - Invoice value = 118

1. When you capitalise including GST - Amount capitalised = 118

Depreciation is allowed on 118 and ITC cannot be availed on 18.

2. When you capitalise excluding GST - Amount capitalised = 100

Depreciation can be taken on 100 + ITC can be availed for Rs. 18.

Applicability of Rule 43:

It is applicable only when the capital goods are used partly for business and partly for non-business/exempted supplies - ITC to be reversed as per the formula to the extent of exempted supplies..

This Rule is not applicable for the context of your query..

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