Page 39 - Chap7 ITC

Ü In case of demerger, ITC is apportioned based on asset value as per the demerger scheme [Rule 41]
Ü "Value of assets" includes all assets, whether ITC was claimed or not
Ü In this case, Daksh Ltd.’s unutilized ITC will be transferred between DG Gold Ltd. & DG Gold Testing
Ltd. as per asset ratio

Particulars Daksh Ltd. DG Gold Ltd. DG Gold testing
(₹) (₹) Ltd.(₹)

Value of Assets 45,00,000 20,00,000 25,00,000
Total Unutilized ITC is ₹ 1,96,000 i.e (₹ 56,000 + ₹ 65,000 + 1,96,000 87,111 1,08,889
₹ 75,000) is to be apportioned in ratio of value of assets of DG (1,96,000 (1,96,000
gold Ltd. & DG gold testing Ltd.) i.e ₹ 20,00,000: ₹ 25,00,000 X 20/45) X 25/45)
= 20:25

11: Sec-18(4): Reversal of credit under special circumstances

Q.31
M/s Blue India Ltd. has been exempted from GST with effect from 01.06.20XY. Earlier these goods
were liable to CGST and SGST @ 9% respectively. Following information is provided on 31.05.20XY:
1) The inputs costing ₹ 1,30,000 (inclusive of CGST & SGST at 18%) are lying in stock.

2) The inputs costing ₹ 53,100 (inclusive of CGST & SGST at 18%) are held in process.
3) The Finished goods valuing ₹ 2,95,000 are in stock, the input cost (inclusive of CGST and SGST at 18%) is
30% of the value.
4) The input tax credit on capital goods lying in stock is ₹ 90,000. These goods were purchased on 17.09.20XX
5) The balance in electronic credit ledger is ₹ 1,75,000.
The department has asked M/s Blue India Ltd. to reverse the credit taken on inputs referred above. However,
M/s Blue India Ltd contends that once validity taken is void and not required to be reversed. What should be
the amount to be paid by Blue Ltd.? Also Determine what your answer would be if the balance in electronic
credit ledger as on 31.05.20XY is ₹ 1,10,000?
Answer: The contention of M/s Blue India Ltd. is not valid in the eyes of law.
Ü If a registered person switches to composition scheme or their supplies become wholly exempt, they must
reverse ITC [Sec 18(4)]

Ü ITC reversal applies to:
Stock (raw, semi-finished, finished goods)Ø
Capital goods (prorated for remaining useful life)Ø
Ü Reversal must be done on the day before switching to composition/exemption
Ü Payment can be made via credit or cash ledger
Ü After payment, ITC balance lapses

Particulars Amount (₹)
Inputs lying in stock (₹ 1,30,000 * 18/118) 19,831
Inputs in process (₹ 53,100 * 18/118) 8,100

Inputs contained in finished goods lying in stock (₹ 2,95,000 * 30% * 18/118) 13,500
Input tax on capital goods used for 9 months taking residual life as 5 years 76,500
(₹ 90,000 *51/60) [As per Rule 44 of CGST rules, 2017, 51 months being the residual life
of capital goods of total 60 months]

Amount to be paid by Blue India Ltd. 1,17,931
Ü The aforesaid amount can be paid by utilizing the balance in electronic credit ledger. The remaining balance in
E-credit ledger of ₹ 57,069 i.e. (₹ 1,75,000 – ₹ 1,17,931) shall lapse.
Ü If balance in electronic credit ledger is ₹ 1,10,000 : Then, M/s Blue India Ltd. will have to pay in cash is ₹ 7,931
i.e. (₹ 1,17,931 - ₹ 1,10,000)

V’Smart Academy 7.37 CA Vishal Bhattad 09850850800