Are you dealing in Taxable and Exempted Both the Goods and Confused about Input Reversal

Are you dealing in Taxable and Exempted Both the Goods ? and wants to know about Reversal on Account of Input and Input Services then this Blog is Completely for you.

The input tax credit in respect of inputs or input services, which attract the provisions of sub-section (1) or sub-section (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-

• T = TOTAL INPUT TAX CREDIT
• T1 = ITC RELATED TO OTHER THEN BUSINESS PURPOSE T2 = EXCLUSIVE FOR EXEMPT SUPPLY
• T3 = ITC RELATED TO BLOCKED CREDIT
• T4 = ITC EXCLUSIVELY RELATED TO TAXABLE SUPPLY INC. ZERO RATED
• C1 = ITC CREDITED TO ECL
• C2 = COMMON CREDIT AVAILABLE
• D1 = CREDIT EXCLUSIVELY RELATED TO EXEMPT FROM COMMON CREDIT (REVERSE THROUGH DRC 03 OR GSTR – 3B)
• D2 = CREDIT RELATED TO NON BUSINESS FROM COMMON CREDIT (REVERSE THROUGH DRC 03 OR GSTR – 3B)
• C3 = ELIGIBLE CREDIT
• E = EXEMPTED TURNOVER
• F = FULL TURNOVER

CALULATION PART                                                                             

C1 = T-(T1+T2+T3)

C2 = C1 – T4 (COMMON CREDIT) D1 = C2*E/F

D2 = 5% OF C2

C3 = {C2- (D1+D2)} ELIGIBLE CREDIT

 IMPORTANT

• For the purpose of this clause, it is hereby clarified that in case of supply of services covered by clause (b) of paragraph 5 of Schedule II of the said Act, value of T4 shall be zero during the construction phase because inputs and input services will be commonly used for construction of apartments booked on or before the date of issuance of completion certificate or first occupation of the project, whichever is earlier, and those which are not booked by the said date.
•  Value of E and F in case of construction

E = aggregate carpet area of the apartments, construction of which is exempt from tax plus aggregate carpet area of the apartments, construction of which is not exempt from tax, but are identified by the promoter to be sold after issue of completion certificate or first occupation, whichever is earlier

F = aggregate carpet area of the apartments in the project

• In the tax period in which the issuance of completion certificate or first occupation of the project takes place, value of E shall also include aggregate carpet area of the apartments, which have not been booked till the date of issuance of completion certificate or first occupation of the project, whichever is earlier
• where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F‘ shall be calculated by taking values of ‘E‘ and ‘F‘ of the last tax period for which the details of such turnover are available, previous to the month during which the said value of ‘E/F‘ is to be calculated

FINAL CALCULATIONS:

• In respect of D1 and D2 : finally calculate figures for annual also if any difference in monthly calculation or final calculation then taxpayer has to adjust that difference till sept. month return of next financial year (Through GSTR- 3B or DRC – 03).
• In case of supply of services covered by clause (b) of paragraph 5 of the Schedule II of the Act, the input tax determined under sub- rule (1) shall be calculated finally, for each ongoing project or project which commences on or after 1st April, 2019, which did not undergo or did not require transition of input tax credit consequent to change of rates of tax on 1st April, 2019 in accordance with notification No. 11/2017- Central Tax (Rate), dated the 28th June, 2017, published vide GSR No. 690(E) dated the 28th June, 2017, as amended for the entire period from the commencement of the project or 1stJuly, 2017, whichever is later, to the completion or first occupation of the project, whichever is earlier, before the due date for furnishing of the return for the month of September following the end of financial year in which the completion certificate is issued or first occupation takes place of the project, in the manner prescribed in the said sub-rule, with the modification that value of E/F shall be calculated taking value of E and F as under:

E = aggregate carpet area of the apartments, construction of which is exempt from tax plus aggregate carpet area of the apartments, construction of which is not exempt from tax, but which have not been booked till the date of issuance of completion certificate or first occupation of the project, whichever is earlier:

F = aggregate carpet area of the apartments in the project

where the aggregate of the amounts calculated finally in respect of ‘D1‘ and ‘D2‘ exceeds the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1‘ and ‘D2‘, such excess shall be reversed by the registered person in FORM GSTR-3Bor through FORM GST DRC-03 in the month not later than the month of September following the end of the financial year in which the completion certificate is issued or first occupation of the project takes place and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section

• of section 50 for the period starting from the first day of April of the succeeding financial year till the date of payment; or (Excess claimed then reverse till sept. month return through DRC-03 or GSTR-3B)

where the aggregate of the amounts determined under sub-rule (1) in respect of ‘D1‘ and ‘D2‘ exceeds the aggregate of the amounts calculated finally in respect of ‘D1‘ and ‘D2‘, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year in which the completion certificate is issued or first occupation takes place of the project. (Less claimed then claim till sept. month return)

In case of supply of services covered by clause (b) of paragraph 5 of Schedule II of the Act, the input tax determined under sub-rule (1) shall be calculated finally, for commercial portion in each project, other than residential real estate project (RREP), which underwent transition of input tax credit consequent to change of rates of tax on the 1st April, 2019 in accordance with notification No. 11/2017- Central Tax (Rate), dated the 28th June, 2017, published vide GSR No. 690(E) dated the 28th June, 2017, as amended for the entire period from the commencement of the project or 1st July, 2017, whichever is later, to the completion or first occupation of the project, whichever is earlier, before the due date for furnishing of the return for the month of September following the end of financial year in which the completion certificate is issued or first occupation takes place of the project, in the following manner:

• The aggregate amount of common credit on commercial portion in the project (C3aggregate_comm) shall be calculated as under,

C3aggregate_comm = aggregate of amounts of C3 determined under sub- rule (1) for the tax periods starting from 1st July, 2017 to 31st March, 2019, x (AC / AT)] + aggregate of amounts of C3 determined under sub- rule (1)for the tax periods starting from 1st April, 2019 to the date of completion or first occupation of the project, whichever is earlier

Where, –

AC = total carpet area of the commercial apartments in the project AT = total carpet area of all apartments in the project

• The amount of final eligible common credit on commercial portion in the project (C3final_comm) shall be calculated as under

C3final_comm = C3aggregate_comm x(E/F) Where, –

E = total carpet area of commercial apartments which have not been booked till the date of issuance of completion certificate or first occupation of the project, whichever is earlier.

F = AC = total carpet area of the commercial apartments in the project

• where, C3aggregate_comm exceeds C3final_comm, such excess shall be reversed by the registered person in FORM GSTR-3Bor through FORM GST DRC-03 in the month not later than the month of September following the end of the financial year in which the completion certificate is issued or first occupation takes place of the project and the said person shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 for the period starting from the first day of April of the succeeding financial year till the date of payment;
• where, C3final_comm exceeds C3 aggregate_comm, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year in which the completion certificate is issued or first occupation takes place of the project.

Input tax determined under sub- rule (1) shall not be required to be calculated finally on completion or first occupation of an RREP which underwent transition of input tax credit consequent to change of rates of tax on 1st April, 2019 in accordance with notification No. 11/2017- Central Tax (Rate), dated the 28th June, 2017, published vide GSR No. 690(E) dated the 28th June, 2017, as amended.

Where any input or input service are used for more than one project, input tax credit with respect to such input or input service shall be assigned to each project on a reasonable basis and credit reversal pertaining to each project shall be carried out as per sub-rule (3)