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Query regarding common ITC reversal, Goods and Services Tax - GST

Issue Id: - 115739
Dated: 4-12-2019
By:- KARAN VERMA
Query regarding common ITC reversal

  • Contents

Sir, in case of sugar mill, assessee has sold sugar, molasses both are taxable supply but assesse has purchase boiler/turbine for generation of power and from this 50% power will be sold to outside and 50% will be captive consumed for manufacturing of sugar.

Now, my question is assessee has to reverse ITC on boiler/turbine on proportionate basis, then what will be base.

Assume- power sale to outside is ₹ 10 crores which is exempt and sugar/molasses sale is ₹ 150 crores. And ITC related to power plant is ₹ 25 crores.

Option-1 Reversal of ITC= (Total exempt sale/Total sale * ITC) = (10/160*25) = ₹ 1.56 crores or

Option-2 Reversal of ITC= 50% of ₹ 25 crores = ₹ 12.5 crores because power sale 50 % sold to outside and 50 % use for sugar manufacturing.

Kindly clarify which option is true.

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Showing Replies 1 to 5 of 5 Records

1 Dated: 4-12-2019
By:- Spudarjunan S

Dear Sir,

In GST regime, when a taxable person has both taxable and exempt supplies, ITC would be allowed only to the extent of taxable supply and ITC in relation to exempt supply would be restricted - Section 17(2) of CGST Act, 2017 read with rule 42 & 43 of CGST Rules, 2017.


2 Dated: 4-12-2019
By:- KARAN VERMA

yes sir, true I Know this, but i want to know which option of reversal is correct as per mentioned above.


3 Dated: 4-12-2019
By:- Spudarjunan S

Being the power plant is used for providing both taxable(Supply of Sugar) and exempt supplies(Supply of Electricity), your option 1 would be resembling to the reversal procedure as prescribed under Rule 42.


4 Dated: 5-12-2019
By:- HariKishan Bhonagiri

I think it Rule 43


5 Dated: 5-12-2019
By:- Spudarjunan S

Yes, incase of inputs, input services rule 42 has be applied.

In case of capital goods, rule 43 has to be applied.

Your provided option 1, resembles for rule 42 reversal, in case of capital goods you have to follow rule 43 which is entirely different calculation.


1

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