Itc reverse on non business and exempt supply 42,43 rule

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This discussion addresses GST rules 42 and 43 concerning the reversal of Input Tax Credit (ITC) for non-business transactions and exempt supplies. It clarifies that businesses trading in both taxable and exempt goods must maintain separate accounts and reverse ITC proportionately for common input services used in exempt supplies. The advice also highlights the importance of engaging a professional when responding to GST department notices regarding these matters.

Kollipara Sundaraiah

Kollipara Sundaraiah (Querist)

01 October 2023 Sir,
A Gst registered dealer 5 precentage tax goods and exempt goods trading transactions.if gst department notice issued details mentioned below.itc reverse on non business transaction and exempt supply sec 17(1)(2) under rule 42, 43.

Dealer taxable and exempt goods separate account transaction and show in gstr3b return.
Question;
Dealer notice received after procedure

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 October 2023 Reply to the notice separate accounts maintained for taxable and exempt goods and no ITC claimed for exempt goods.

CA Altamush Zafar

CA Altamush Zafar (Expert)

02 October 2023 For common ITC you need to reverse ITC proportionate to exempt supplies. For specific inputs related to exempt supplies no ITC is to be taken. For reply of notices always engage a professional..