Reversal under rule 42 of CGST Act, Goods and Services Tax - GST

[Manali Daiya]

Dear Experts,

Request your views on the following

As per Rule 42(1), there is requirement of monthly reversal of common credit in the ratio of exempt turnover to total turnover. However, as per rule 42(2), the reversal is required to be computed annually and if there is any variation between annual and monthly numbers then, the same is either required to be reversed or recredited by September month following the end of the financial year.

Query

1. Whether recomputation of number annually are required to be done on annual nos or just recomputation of monthly numbers after factoring in any changes during the year?

2. What is the way out if there is excess reversal as per monthly calculation and time limit to reclaim the credit i.e. september month has lapsed.

Thanks

Posts / Replies

[Shilpi Jain]

The recombination has to be done based on the annual figures.

If time has lapsed then unless internal computations are revised may not be possible to avail.

[Ganeshan Kalyani]

Sir, if possible consider monthly turnnover for reversal of ITC on monthly basis. If not then do it annually.

[Manali Daiya]

Dear Experts,

Month on month reversal was not done for the first and same was reversed while filing annual return. As per rule 42, ratio for reversal based on monthly figures is different for each month. However, assessee has reversed the credit based on annual nos using a single ratio.

Department is demanding the reversal to be computed on monthly figures and if there's any adjustement to such monthly numbers then the same is only required to be recomputed on annual basis.

Wanted to know whether the interpretation of department with respect to rule 42(2) is correct

(2)[Except in case of supply of services covered by clause (b) of paragraph 5 of the Schedule II of the Act, the input tax credit] determined under sub-rule (1) shall be calculated finally for the financial year before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit relates, in the manner specified in the said sub-rule and-