Input Tax Credit on goods and services partly used for business purpose and partly used for Other Purpose, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies :
As per Sec. 17(1) of CGST Act, 2017, where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
As per Sec. 17(2) of CGST Act, 2017, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
As per Sec. 17(3) of CGST Act, 2017, the value of exempt supply under sub-section
(2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
In Rule 42 and Rule 43, provides the manner of reversal of inputs, input services and capital goods used partly for the purpose of business and partly for other purpose or used partly for effecting taxable supplies including zero rated supplies
Analysis:
1. If goods or services or both are used partly for the purpose of any business and partly for other purposes: Credit input tax attributable to the purposes of his business shall be allowed.
2. If goods or services or both are used partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies : Credit of the input tax attributable to taxable supplies including zero-rated supplies shall be allowed.
3. No credit of inputs, input services used exclusively for purpose other than business or effecting exempt supplies
4. No credit of in-eligible inputs and input services as listed in Sec. 17(5) of CGST Act, 2017.
5. Entire credit on inputs and input services used exclusively in or in relation to taxable supplies including zero rated supplies is admissible.
6. Out of common credit, credit attributable to exempt supplies shall be reversed, calculated as per below:-
Input Tax Credit to be reversed=Common Credit*(Exempted Supplies during the tax period /total turnover during tax period)
7. Credit attributable to non-business purpose shall be 5% of Common Credit
8. The amount of common credit and reversal thereof shall be calculated separately for Central Tax, State Tax and Integrated Tax.
9. The input tax credit determined above shall be calculated finally before due date for filing the return for the month of September of following year.
10. After final calculation of amount of input tax credit needs to be reversed is excess than amount of input tax credit reversed during the respective tax period then, the such excess amount shall be added to the output tax liability in the month not later than the month of September following the end of the financial year to which such credit relates
11. The Interest on such excess amount at the rate of 18% per annum as per Sec.50(1) of CGST Act, 2017 is payable for the period starting from the first day of April of the succeeding financial year till the date of payment.
12. However, after final calculation of amount of input tax credit needs to be reversed is less than amount of input tax credit reversed during the respective tax period then, the such amount of input tax credit reversed in excess shall be claimed as credit by registered person in his return for the month not later than the month of September following the end of the financial year to which such credit relates.