Apportionment of credit on inputs and input services
A person may be engaged in supply of exempt and taxable supplies. In such a scenario, he will not be eligible to claim full input tax credit on inputs and input services. The draft ITC rules provide a detailed procedure to compute the input tax credit entitlement of such person. The following chart explains the procedure in a simplified way.
The following calculation is to be made on monthly basis and separately for CGST, SGST, UTGST and IGST.
|Step-1||Total input tax involved on inputs and input services in a tax period (i.e. a month||
|1A||Exclusively for purpose other than business||
|1B||Exclusively for effecting exempt supplies||
|1C||Negative list for credit – Section 17(5) of the CGST Act||
|Step-2||Amount of ITC credited to electronic credit ledger||
C1=T- T1– T2– T3
|2A||Credit pertaining to inputs and input services used exclusively for effecting taxable supplies||
C2=C1 – T4
|2C||ITC attributable towards exempt supplies||
|2D||credit attributable towards non- business purposes||
D2 = 5%*C2
|Step-3||Add D1 & D2 to output tax liability|
- T1 , T2 ,T3 & T4 are to be determined at invoice
- Here ‘E’ refers to exempt supplies i.e. all turnover other than taxable and zero rated supplies. It may be noted that exempt supplies include value of land & building sold or value of securities sold.
- ‘F’ refers to total turnover in a tax period
To simplify the above calculation : Credit available with respect to inputs and input services is C1 – (D1 & D2)
Now the above calculation has to be finalized at end of the year based on annual figures.
- Where credit eligible exceeds the credit availed in monthly returns, the balance can be availed in or before filing the return of the month September of the following year
- Where the credit eligible is less than the credit availed in monthly returns, the excess will be recoverable along with interest