CMA Final · Indirect Tax Laws and Practice · Input Tax Credit
An ISD distributes Rs 1,20,000 of credit on a common input service attributable to three recipients, X, Y and Z, using the relevant-period turnovers of Rs 50 lakh, Rs 30 lakh and Rs 20 lakh respectively. Z has made only exempt supplies. Under Rule 39, how much credit is distributed to Z?
Z is distributed Rs 24,000. The formula C1 = t1/T x C covers all recipients, including those making exempt supplies, so Z's share is 20 lakh over 100 lakh, applied to Rs 1,20,000. Excluding Z because of exempt supplies would be incorrect.
- ANil, because Z makes exempt supplies
- BRs 24,000Correct
- CRs 40,000
- DRs 36,000
Explanation
Clause (f) applies the formula C1 = (t1/T) x C to every recipient, including those engaged in exempt supplies. Z's share is 20/100 x 1,20,000 = Rs 24,000. The nil option wrongly excludes Z, and Rs 36,000 is Y's share.
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