The 60-second version
Input tax credit must reverse when used for exempt supplies or personal use — Rule 42 monthly apportionment and Rule 43 on capital goods disposal. I track ratio in books.
Common credit needs monthly reversal — not year-end surprise
Returning founders running restaurant + taxable catering or clinic + exempt health services hit Rule 42 apportionment every month.
GSTR-3B Table 4(d) captures reversal — mismatch with books triggers audit notice.
Capital goods sold or scrapped within 5 years needs Rule 43 clawback.
E-invoice lane: IRP guide.
ITC reversal triggers
| Rule | Trigger | Method |
|---|---|---|
| Rule 42 | Exempt + taxable mix | Monthly turnover ratio |
| Rule 43 | Capital goods disposal | Remaining life fraction |
| Blocked credit | Motor vehicle personal | Full deny |
| 17(5) | Personal use goods | No ITC ever |
| Transition | Pre-GST stock | Separate schedule |
ITC reversal sequence
Classify supplies
Taxable vs exempt turnover buckets.
Compute ratio
Exempt turnover ÷ total turnover monthly.
Reverse in 3B
Table 4(d) before filing.
Capital register
Track Rule 43 life per asset.
Annual true-up
GSTR-9 reconciles yearly reversal.
Reversal flow
ITC reversal kit
- Monthly turnover split.
- Purchase register.
- Asset capitalisation list.
- 3B Table 4 screenshot.
- CA working paper.
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LUT exports
Zero-rated supplies with LUT — ITC refundable, not reversal target.
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Community signal
What to watch in real discussions
Search community threads for the exact phrase, then treat repeated complaints as risk signals rather than official advice.
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Turn this guide into a decision file
0 of 4 checked
100% taxable business?
No Rule 42 if zero exempt turnover — document nil exempt.
Software SaaS mix?
Exempt education content may trigger ratio — classify carefully.
Forgot reversal month?
Amend next 3B + interest if underpaid.
Personal laptop?
Blocked under 17(5) — never claim ITC.
Restaurant AC ITC?
Common credit — Rule 42 on exempt food sales.
Composition dealer?
No ITC — reversal N/A; cannot issue ITC invoices.
Your tax year is already running.
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