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ITC Reversal as per Rule 42, Goods and Services Tax - GST

Issue Id: - 113447
Dated: 1-3-2018
ITC Reversal as per Rule 42

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If more than one business vertical are under same GSTIN itself, while applying Rule 42 for ITC Reversal- Total Turnover of entire GSTIN to be taken or same can be split into segment wise also ?

For ex:- Say, under one GSTIN there exists three Business Vertical - Hotel, Courier & Plastic. Hotel vertical has taxable and exempt supplies to calculate ITC Reversal for common input credit can we use the following

Common ITC (of Hotel Vertical) * Exempted Supply in Hotel Vertical


Total Supply of Hotel Vertical

Or We have to consider the Total supply of all vertical (for the denominator)

Experts advice Please.

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Showing Replies 1 to 3 of 3 Records

1 Dated: 1-3-2018
By:- Ganeshan Kalyani

first you have arrive at ITC attributable to hotel vertical from total ITC. then from the ITC of hotel you have to apply the formula which you have mentioned in your query.

2 Dated: 2-3-2018

Dear Sir,

Let me reiterate with clear examples. All the verticals are registered under the one GSTIN only.

Say turnover of each vertical is ₹ 10L each. Total Sales ₹ 30L.

Plastic unit is fully exempt. No ITC availed all inputs and input services of Plastic Unit.

Hotel Unit - Say Taxable is ₹ 7L and exempt is ₹ 3L. Common Credit ₹ 10000.

Courier Unit - Fully Taxable services. ₹ 10L

Now to apply Rule 42 on ₹ 10000/- which formula is correct ?

10000 * 3L/10L = ₹ 3000/- + 500 (5% of 10000) OR

10000*13L/30L = ₹ 4333/- + 500

Experts advice please.

3 Dated: 3-3-2018
By:- Ganeshan Kalyani

turnover of plastic, hotel and courier division put together is ₹ 30 lacs.

total common input tax credit is ₹ 10 thoudand.


10,000 x 10 lacs ÷ 30 lacs = ₹ 3,333/- ( it means out of common credit of ₹ 10 thousand , ₹ 3,333/- is attributable to each division say, plastic, hotel and courier

₹ 3,333/- of plastic division is ineligible credit.

₹ 3,333/- of courier division is fully creditable .

₹ 3,333/- of hotel division need further birfucate into tax attributable to taxable product and exempt product. Formula : 3,333 x 7 lacs ÷ 10 lacs = 2,333. Here, ₹ 2,333/- is eligible credit.

hope your query is resolved from above example.


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