Rule 44 of CGST Rules 2017: Manner of Reversal of ITC under Special Circumstances

Provisions under Rule 44 of the Central Goods and Services Tax (CGST) Rules, 2017 relating to “Manner of Reversal of Input Tax Credit (ITC) under Special Circumstances”, are as under:

CGST Rule 44: Manner of Reversal of Credit under Special Circumstances (Chapter-V: Input Tax Credit)

(1) The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished and finished goods held in stock, and capital goods held in stock shall, for the purposes of sub-section (4) of section 18 or sub-section (5) of section 29, be determined in the following manner, namely,-

(a) for inputs held in stock and inputs contained in semi-finished and finished goods held in stock, the input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had been availed by the registered taxable person on such inputs;

(b) for capital goods held in stock, the input tax credit involved in the remaining useful life in months shall be computed on pro-rata basis, taking the useful life as five years.

Illustration:
Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months= 5 months ignoring a part of the month
Input tax credit taken on such capital goods= C
Input tax credit attributable to remaining useful life= C multiplied by 5/60

(2) The amount, as specified in sub-rule (1) shall be determined separately for input tax credit of central tax, State tax, Union territory tax and integrated tax. [sub-rule (2) substituted from 01/07/2017: refer Note 2]

(3) Where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods on the effective date of the occurrence of any of the events specified in sub-section (4) of section 18 or, as the case may be, sub-section (5) of section 29. [sub-rule (3) substituted from 01/07/2017: refer Note 2]

(4) The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC 03, where such amount relates to any event specified in sub-section (4) of section 18 and in FORM GSTR 10, where such amount relates to the cancellation of registration.

(5) The details furnished in accordance with sub-rule (3) shall be duly certified by a practicing chartered accountant or cost accountant.

(6) The amount of input tax credit for the purposes of sub-section (6) of section 18 relating to capital goods shall be determined in the same manner as specified in clause (b) of sub-rule (1) and the amount shall be determined separately for input tax credit of IGST and CGST central tax, State tax, Union territory tax and integrated tax [text substituted from 01/07/2017: refer Note 1(c)]:

Provided that where the amount so determined is more than the tax determined on the transaction value of the capital goods, the amount determined shall form part of the output tax liability and the same shall be furnished in FORM GSTR 1.

Amendments History:

1. Amendments from 01/07/2017 vide Notification 15/2017:

(a) In sub-rule (2), the words “integrated tax and central tax” substituted with the words “central tax, State tax, Union territory tax and integrated tax”. (refer Note 2)

(b) In sub-rule (3), the text (2) substituted with (3). (refer Note 2)

(c) In sub-rule (6), the words “IGST and CGST” substituted with the words “central tax, State tax, Union territory tax and integrated tax”.

2. Sub-rules (2) & (3) substituted from 01/07/2017 vide Notification 17/2017. Sub rules (2) & (3) before substitution:

(2) The amount, as specified in sub-rule (1) shall be determined separately for input tax credit of integrated tax and central tax central tax, State tax, Union territory tax and integrated tax [text substituted from 01/07/2017: refer Note 1(a)].

(2) (3) [substituted from 01/07/2017: refer Note 1(b)] Where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods on the effective date of the occurrence of any of the events specified in sub-section (4) of section 18 or, as the case may be, subsection (5) of section 29.

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