GST Input Tax Credit Treatment in case Switchover from Taxable to Exempt /Composition Scheme

By | March 18, 2017
(Last Updated On: April 27, 2017)

What is the Input Tax Credit Treatment in case of switchover from taxable to exempt transactions or from Regular to composition Scheme ?

As per Section 18(7) of the Revised Model GST Law the taxable person should pay the input tax credit already availed to the extent of credit in stock and on capital goods as reduced by percentage as prescribed and balance input tax credit in electronic credit ledger will lapse. The taxable person can pay by way of debit to electronic credit
ledger or electronic cash ledger.

{ Read GST Composition Scheme Analysis after CGST Act 2017 ]

Extract of Section 18(7) [ Availability of credit in special circumstances ] of Revised Model GST Law

Where any registered taxable person who has availed of input tax credit switches over as a taxable person for paying tax under section 9 [ Composition Levy] or, where the goods and / or services supplied by him become exempt absolutely under section 11 Power to grant exemption from tax ] , he shall pay an amount, by way of debit in the electronic credit or cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of such switch over or, as the case may be, the date of such exemption:

PROVIDED that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

Leave a Reply

Your email address will not be published. Required fields are marked *