Skip to content

CMA Intermediate · Direct and Indirect Taxation · Input Tax Credit

Kaveri Textiles Ltd makes taxable fabric and also exempt supplies. It buys a common input service with GST of Rs 90,000 used for both. Under section 17(2), credit is restricted to the portion attributable to taxable supplies. Using the prescribed ratio of exempt turnover to total turnover, where taxable turnover is Rs 7,50,000 and exempt turnover Rs 2,50,000 (both excluding tax), what credit is permitted?

Rs 67,500 is allowed. Section 17(2) restricts credit on common inputs to the part attributable to taxable supplies. Taxable turnover is 75% of total turnover of Rs 10,00,000, so 75% of Rs 90,000 is eligible. Rs 22,500 is the amount that must be reversed.

  1. ARs 22,500
  2. BRs 67,500Correct
  3. CRs 90,000
  4. DRs 60,000

Explanation

Total turnover = 7,50,000 + 2,50,000 = 10,00,000. Taxable share = 75%. Eligible credit = 90,000 x 75% = Rs 67,500. Rs 22,500 is the exempt share (the reversal amount) and is wrong as the credit.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax CreditFree diagnostic mock

More Input Tax Credit questions