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ITC (Rule 43 Apportionment of credit of capital goods)

How to calculate for apportionment of credit of capital goods for the following. Mr. X is manufacturing Pen (taxable goods) and Pencils (exempt goods). He purchased one machinery for manufacturing. He uses the machinery only for exempt goods(Pencil) for first Six months and from seventh month onwards he used the machine commonly for both goods. Assume Value of machinery purchased is â?¹100000 and the Turnover of Pencil is 60 Lakhs and Turnover of Pen is 40Lakhs??


surya prakash

surya prakash

CA Inter

1K+

23-May-20 12:02

18

Answers (11)

Yaa


NVSS WORLD B

NVSS WORLD B

CA Inter

68K+

23-May-20 16:17

Say -Tax rate is 18%, then Input Tax is Rs.18000/i,(1,00,000*18%) Input tax credit is not eligible on exempted goods so credit not given for first 6 months. Capital used for both exempted and taxable goods so credit will be proportionately for 54 months out of 60 months. Calculation-18000/60=300*6=1800 (Ineligible) Balance Rs.16200 *40/100=Rs. 6480 on Taxable portion(allowed) i.,e Rs. 120/- monthly(6480/54 Months) Exempted Rs.16,200*60/100=Rs.9720 ITC (not allowed).


KEERTHI PRIYA

KEERTHI PRIYA

Moderator

23-May-20 16:50

For that Capital good 18000 credit is provided in the electronic credit ledger at the time of purchase itself. Every month inelligble portions are added back output tax liabilities to electronic cash ledger for a period of 60 months right?


surya prakash

surya prakash

CA Inter

1K+

23-May-20 17:59

On Capital goods ITC is taken at a time. 18000 is taken immediately as credit. Out of ITC 18000, 300 ineligible credit is added back to output tax liability for the period of 6months, Leaving to remaining credit of 16200 to be apportioned based on Rule 43. Cal. 16200/60months = 270 (common credit attributable to a month for both taxable and exempt supplies) From that 270, calculate credit attributable to exempt supplies and add back to electronic cash ledger. Cal. 270 * 60/100 = 162 [This has to be added back to output tax liability for a period of 54months (since 6months already expired) along with interest]. Correct me if i'm wrong.


shanthi ravichandran

shanthi ravichandran

CA Inter

5

23-May-20 18:22

If in the same question for the first six months if he uses that machinery for Pen ( Taxable goods) and thereafter frm 7th month he uses it for both Pen and Pencil, then how to apportion the tax paid in that case?


surya prakash

surya prakash

CA Inter

1K+

26-May-20 09:50

In cal of 16200/54 will be considered other than that remaining cal was correct.

It should be 16200/60 was correct. Proportionate value of exempted will be reversed.


KEERTHI PRIYA

KEERTHI PRIYA

Moderator

26-May-20 12:46

If in the same question for the first six months if he uses that machinery for Pen ( Taxable goods) and thereafter frm 7th month he uses it for both Pen and Pencil, then how to apportion the tax paid in that case?

Input Tax on such capital goods -5% for each quarter from Invoice date will be reduced and balance is divided with 60 months.


KEERTHI PRIYA

KEERTHI PRIYA

Moderator

26-May-20 12:52

It should be 16200/60 was correct. Proportionate value of exempted will be reversed.

So many suggestions u have given. Which is the exact answer. Can u answer expandedly.


surya prakash

surya prakash

CA Inter

1K+

26-May-20 12:54

So many suggestions u have given. Which is the exact answer. Can u answer expandedly.

Input Tax on Capital goods Rs.18000/- -1800/-(exempted for first 6months) =16200(Common credit attributable to both Exempted and Taxable) As per rule Common credit Rs.16200/- (Tc) divided with 60. such amount is reversed to Electronic cash in the ratio of Exempted Turnover (60/100) along with applicable Interest. IF capital goods used for Taxable earlier and subsequently used for common then, Input Tax on such capital goods -5% for each quarter from Invoice date will be reduced(Net amount is Tc) and balance is divided with 60 months,such amount is reversed to Electronic cash in the ratio of Exempted Turnover (60/100) along with applicable Interest.


KEERTHI PRIYA

KEERTHI PRIYA

Moderator

26-May-20 13:12