ITC reversal calculator

Questions people ask

What is ITC reversal under Rule 42?

When you use the same inputs and input services for taxable and exempt supplies, you can't keep all the credit. Rule 42 splits the month's credit and reverses the share that relates to exempt supplies, and sometimes 5% for non-business use.

What is the Rule 42 formula?

C1 = T − (T1 + T2 + T3). C2 = C1 − T4. D1 = (E ÷ F) × C2, where E is exempt supplies and F is total turnover in the State for the month. D2 = 5% of C2 when common credit is also used for non-business purposes. You reverse D1 + D2 and keep C3 = C2 − (D1 + D2).

What do T1, T2, T3 and T4 mean?

T1 is credit on inputs used for non-business purposes, T2 is credit used only for exempt supplies, T3 is blocked credit under section 17(5), and T4 is credit used only for taxable supplies, including exports and supplies to an SEZ.

How is ITC on capital goods reversed under Rule 43?

Divide the common credit on a capital good by 60 to get the credit for one month of its five-year life. Each month, reverse (E ÷ F) × the monthly credit of all such goods still within five years.

Where is the reversal reported?

In Table 4B of GSTR-3B, in the row for reversals under rules 42 and 43. The field isn't filled in for you.

Do I work it out for each tax head?

Yes. C3 and the reversal are worked out separately for CGST, SGST/UTGST and IGST.