As per Rule 43 of CGST Rules, you need to avail the input tax credit on capital goods in the same month of purchase. There is no provision in GST rules, to avail or carry forward ITC for a period of 5 years. If you are manufacturing exempted goods, calculate the ITC per month [total ITC/60, (5 years * 12 months)]. As and when the exempted goods are manufactured, you can reverse the ITC to the extent of exempted turnover in the same month (ITC per month * exempted turnover/ total turnover). Based on the return filing period, you can compute the ITC per month or per quarter, and reverse the ITC accordingly.
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Reversal of ITC on manufacturing exempt supplies
1. Gateway of Tally > press F12 > Voucher Entry > and set Allow expenses/fixed assets in purchase voucher to Yes .
2. Press Ctrl+A to save.
3. Gateway of Tally > Accounting Vouchers > F9: Purchases .
● To record the purchase in accounting invoice mode by autocalculating the GST amount, click I : Accounting Invoice .
● To record the transaction in voucher mode by manually entering the GST amount, press Ctrl+V .
4. Select the party ledger.
5. Select the capital goods ledger grouped under Fixed Assets and enter the amount.
6. Select the Central Tax and State/UT Tax ledgers. In the accounting invoice mode, the amount gets autocalculated based on the GST rates defined in the capital goods ledger.
7. Press Enter to save.
1. Gateway of Tally > Accounting Vouchers > F7: Journal .
2. Press Alt+J (Stat Adjustment).
3. Select Reversal of Input Tax Credit with Capital credit due to exempted supplies – Rule 43(1)(h) .
4. Debit the expenses ledger. Ensure the option Is GST Applicable is set to No in the expense ledger.
5. Credit the Central Tax ledger. Based on the Taxable Value of goods used for personal consumption, enter the ITC to be reversed. Enter the corresponding tax Rate and Taxable Value .
6. Credit the State/UT Tax ledger. The amount appears automatically. The tax Rate and Taxable Value will appear as provided for Central Tax ledger.
7. Press Enter to save.
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