Compute the mandatory monthly Input Tax Credit (ITC) reversal on common capital goods (plant, machinery, equipment) with 60-month useful life apportionment under CGST Rule 43.
Sum of ITC on common capital goods used for both taxable & exempt supplies.
Under CGST Rule 43(1)(c), the useful life of all capital assets is statutorily fixed at 5 years (60 tax periods) from the date of invoice.
To be added to Table 4(B)(1) / Table 3.1.a of GSTR-3B for each of the 60 months.
Rule 43 of the Central Goods and Services Tax (CGST) Rules, 2017 outlines the mechanism for distributing and reversing Input Tax Credit on capital goods used commonly for effecting both taxable supplies (including zero-rated exports) and exempt supplies, or for business and non-business purposes.
When a capital asset originally used exclusively for exempt supplies is subsequently used commonly for taxable supplies, ITC can be credited to the Electronic Credit Ledger after reducing 5% percentage points for every quarter or part thereof from the date of invoice.
| Asset Usage Category | ITC Treatment | Electronic Credit Ledger Impact | Monthly Reversal |
|---|---|---|---|
| Exclusively Non-Business / Exempt | Ineligible | Not Credited | Nil |
| Exclusively Taxable / Zero-Rated | 100% Eligible | Full Credit Taken | Nil |
| Common Use (Taxable + Exempt) | Credited Full, Reversal Monthly | Full Credit Taken initially | Te = (E/F) × Tm for 60 months |
Under Section 18(6), when capital goods are disposed of, the taxpayer must pay an amount equal to the ITC taken reduced by 5 percentage points per quarter or the tax on transaction value, whichever is higher.
The 60-month duration commences directly from the invoice date of the capital asset, regardless of the date of actual installation or commissioning.
ITC on construction of immovable property (except plant and machinery) is permanently blocked under Section 17(5)(d), so Rule 43 does not apply as no ITC is allowed in the first place.