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

(updated as on 15.11.2017)

(1) Subject to the provisions of sub-section (3) of section 16, theinput 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 otherpurposes, or partly used for effecting taxable supplies including zero rated supplies andpartly for effecting exempt supplies, shall be attributed to the purposes of business or foreffecting taxable supplies in the following manner, namely,-

(a) the amount of input tax in respect of capital goods used or intended to be usedexclusively for non-business purposes or used or intended to be used exclusively foreffecting exempt supplies shall be indicated in FORM GSTR-2 and shall not becredited to his electronic credit ledger;

(b) the amount of input tax in respect of capital goods used or intended to be usedexclusively for effecting supplies other than exempted supplies but including zero ratedsupplies shall be indicated in FORM GSTR-2 and shall be credited to theelectronic 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 usefullife of such goods shall be taken as five years from the date of the invoice for suchgoods:

Provided that where any capital goods earlier covered under clause (a) issubsequently covered under this clause, the value of A shall be arrived at byreducing the input tax at the rate of five percentage points for every quarter or partthereof 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 shallnot attract the provisions of sub-section (4) of section 18, if it is subsequently coveredunder this clause.

(d) the aggregate of the amounts of A credited to the electronic credit ledger underclause (c), to be denoted as Tc, shall be the common credit in respect of capital goodsfor a tax period:

Provided that where any capital goods earlier covered under clause (b) issubsequently covered under clause (c), the value of A arrived at by reducing theinput tax at the rate of five percentage points for every quarter or part thereof shall beadded to the aggregate value Tc;

(e) the amount of input tax credit attributable to a tax period on common capital goodsduring their useful life, be denoted as Tm and calculated as

Tm=Tc60

(f) the amount of input tax credit, at the beginning of a tax period, on all commoncapital goods whose useful life remains during the tax period, be denoted as Trand shall be the aggregate of Tm for all such capital goods;

(g) the amount of common credit attributable towards exempted supplies, be denotedas Te, and calculated as

Te=(E F) x 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 duringthe said tax period or the aforesaid information is not available, the value of E/Fshall be calculated by taking values of E and F of the last tax period for which thedetails of such turnover are available, previous to the month during which the saidvalue 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 entry 51 and 54 of
List II of the said Schedule;

(h) the amount Te along with the applicable interest shall, during every tax period ofthe useful life of the concerned capital goods, be added to the output tax liability of theperson making such claim of credit.

(2) The amount Te shall be computed separately for central tax, State tax, Union territory taxand integrated tax.
[Explanation – For the purposes of rule 42 and this rule, it is hereby clarified that theaggregate value of exempt supplies shall exclude the value of supply of services specified inthe notification of the Government of India in the Ministry of Finance, Department ofRevenue No. 42/2017-Integrated Tax (Rate), dated the 27th October, 2017 published in theGazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR1338(E) dated the 27th October, 2017.](Inserted vide Notification No. 55/2017-Central Tax dated 15.11.2017)

CHAPTER V

INPUT TAX CREDIT

Rule 36 :Documentary requirements and conditions for claiming input tax credit
Rule 37 : Reversal of input tax credit in the case of non-payment of consideration
Rule 38 :Claim of credit by a banking company or a financial institution
Rule 39 :Procedure for distribution of input tax credit by Input Service Distributor
Rule 40 :Manner of claiming credit in special circumstances
Rule 41 :Transfer of credit on sale, merger, amalgamation, lease or transfer of abusiness
Rule 42 :Manner of determination of input tax credit in respect of inputs or input servicesand reversal thereof
Rule 43 :Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases
Rule 44 :Manner of reversal of credit under special circumstances
Rule 44A : Manner of reversal of credit of Additional duty of Customs in respect of Golddore bar
Rule 45 :Conditions and restrictions in respect of inputs and capital goods sent to the jobworker