ITC Reversal Calculator (Rule 42).
When inputs and input services are used partly for taxable supplies and partly for exempt supplies or non-business purposes, part of the common credit has to be reversed each month. This works through the Rule 42 steps and gives you D1, D2 and the net eligible credit.
D1 — reversal for exempt supplies
₹
C2 × (E ÷ F) = ₹ × %
D2 — deemed reversal for non-business use
₹
5% of common credit C2
Total ITC to reverse (D1 + D2)
₹
Add this to output tax liability in GSTR-3B (Table 4B).
| Step | Amount |
|---|---|
| C1 = T − (T1 + T2 + T3) | ₹ |
| C2 = C1 − T4 (common credit) | ₹ |
| C3 = C2 − (D1 + D2) (net eligible) | ₹ |
| Eligible ITC for the month = T4 + C3 | ₹ |
Enter total turnover F greater than zero, and make sure T1 + T2 + T3 + T4 is not more than T, for a meaningful result.
The Rule 42 steps
- C1 = T − (T1 + T2 + T3). Strip out credit that is exclusively non-business, exclusively exempt, or blocked. C1 is credited to the electronic credit ledger.
- C2 = C1 − T4. Remove credit that is exclusively for taxable supplies. What is left is the common credit.
- D1 = C2 × (E ÷ F). The share of common credit attributable to exempt supplies, by turnover ratio.
- D2 = 5% of C2. A flat deemed reversal for non-business use.
- C3 = C2 − (D1 + D2) is the common credit you keep. D1 + D2 is added back to your output tax liability.
Rule 42 is computed every month and then finalised for the whole financial year by the due date of the September return of the following year — any shortfall in reversal carries interest, any excess can be re-claimed. Capital goods are handled separately under Rule 43 (over 60 months). This calculator is a planning aid; confirm the figures with your books and a professional before filing.