Jinia is a Garments manufacturer registered under GST. It received a Government order for making Garments for Defence Personnel (exempted from GST under a special notification by the Government of India) for which it pro

As per Section 17 of the Central Goods and Services Tax Act, 2017 read with Rule 42 of CGST Rules law if goods or services or both are used by the registered person partly for effecting taxable supplies including Zero rated supplies under this Act or under the IGST Act and partly for effecting exempt supplies under the said Act, the amount of credit shall be restricted to so much of the input tax as is attributable to taxable supplies including Zero rated supplies. In the given case Thread, Buttons and Collars are used for both taxable as well as exempt supplies. As per the manner of apportionment prescribed in CGST Act. Credit attributable to exempt supplies = Common Credit x Exempt Turnover / Total Turnover In the given case Common ITC credit (₹ 25,000 + 45,000 + 50,000) = ₹ 1,20,000 Exempt Turnover = ₹ 2,00,000 Total Turnover (₹ 10,00,000 + 2,00,000) = ₹ 12,00,000 Therefore, Credit attributable to Exempt supplies = (1,20,000 x 2,00,000) / 12,00,000 = ₹ 20,000 Hence, Jinia would have to reverse ITC of Rupees 20,000 in its GSTR-3B in the month of January 2021 and only ₹ 1,00,000 (₹ 1,20,000 - ₹ 20,000) can be availed by June as ITC in respect of Thread, Buttons and Collars.