Rule 43 CGST Rules 2017 : Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

By | July 13, 2017
(Last Updated On: July 5, 2018)

 Rule 43 CGST Rules 2017

Summary of Rule 43 CGST Rules 2017

( Rule 43 CGST Rules 2017 explains Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases and is covered in Chapter V : Input Tax Credit  : Inserted by the Central Goods and Services Tax (Second Amendment) Rules, 2017, w.e.f. 1-7-2017 amended by Central Goods and Services Tax (Twelfth Amendment) Rules, 2017 and Central Goods and Services Tax (Amendment) Rules, 2018)

Rule 43 CGST Rules 2017

Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

43. (1) Subject to the provisions of sub-section (3) of section 16, the input tax credit in respect of capital goods, which attract the provisions of sub-sections (1) and (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,—

(a)the amount of input tax in respect of capital goods used or intended to be used exclusively for non-business purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and shall not be credited to his electronic credit ledger;
(b)the amount of input tax in respect of capital goods used or intended to be used exclusively for effecting supplies other than exempted supplies but including zero-rated supplies shall be indicated in FORM GSTR-2 and shall be credited to the electronic credit ledger;
(c)the amount of input tax in respect of capital goods not covered under clauses (a) and (b), denoted as ‘A’, shall be credited to the electronic credit ledger and the useful life of such goods shall be taken as five years from the date of the invoice for such goods:
Provided that where any capital goods earlier covered under clause (a) is subsequently covered under this clause, the value of ‘A’ shall be arrived at by reducing the input tax at the rate of five percentage points for every quarter or part thereof and the amount ‘A’ shall be credited to the electronic credit ledger;
Explanation.—An item of capital goods declared under clause (a) on its receipt shall not attract the provisions of sub-section (4) of section 18, if it is subsequently covered under this clause.
(d)the aggregate of the amounts of ‘A’ credited to the electronic credit ledger under clause (c), to be denoted as ‘Tc‘, shall be the common credit in respect of capital goods for a tax period:
Provided that where any capital goods earlier covered under clause (b) is subsequently covered under clause (c), the value of ‘A’ arrived at by reducing the input tax at the rate of five percentage points for every quarter or part thereof shall be added to the aggregate value ‘Tc‘;
(e)the amount of input tax credit attributable to a tax period on common capital goods during their useful life, be denoted as ‘Tm‘ and calculated as—

Tm= Tc÷60

(f)the amount of input tax credit, at the beginning of a tax period, on all common capital goods whose useful life remains during the tax period, be denoted as ‘Tr‘ and shall be the aggregate of ‘Tm‘ for all such capital goods;
(g)the amount of common credit attributable towards exempted supplies, be denoted as ‘Te‘, and calculated as-

Te= (E÷ F) × Tr

where,
‘E’ is the aggregate value of exempt supplies, made, during the tax period, and
‘F’ is the total turnover of the registered person during the tax period:
Provided that 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.
Explanation.—For the purposes of this clause, it is hereby clarified that the aggregate value of exempt supplies and the total turnover shall exclude the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule;
(h)the amount Te along with the applicable interest shall, during every tax period of the useful life of the concerned capital goods, be added to the output tax liability of the person making such claim of credit.

(2) The amount Te shall be computed separately for Central tax, State tax, Union territory tax and integrated tax.

1 [Explanation.—For the purposes of rule 42 and this rule, it is hereby clarified that the aggregate value of exempt supplies shall exclude:—

(a)the value of supply of services specified in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 42/2017- Integrated Tax (Rate), dated the 27th October, 2017 published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i), vide number GSR 1338(E) dated the 27th October, 2017;
(b)the value of services by way of accepting deposits, extending loans or advances in so far as the consideration is represented by way of interest or discount, except in case of a banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances; and
(c)the value of supply of services by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India. ]

Notes on Amendment in Rule 43 CGST Rules 2017

. Substituted by the Central Goods and Services Tax (Amendment) Rules, 2018, w.e.f. 23-1-2018. Prior to its substitution, the said Explanation, as inserted by the Central Goods and Services Tax (Twelfth Amendment) Rules, 2017, w.e.f. 15-11-2017, read as under :

Explanation.—For the purposes of rule 42 and this rule, it is hereby clarified that the aggregate value of exempt supplies shall exclude the value of supply of services specified in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 42/2017-Integrated Tax (Rate), dated the 27th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1338(E) dated the 27th October, 2017.”


 Rule 43 CGST Rules 2017

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