Check if your purchase qualifies as blocked credit under Section 17(5). Calculate proportional ITC reversal under Rule 42 for common inputs used in both taxable and exempt supplies.
Purchase Details
Section 17(5) — Blocked Credits Check
Select the categories that apply to your purchase. If any of these match, the ITC is blocked (fully or partially).
Rule 42 — Common Credit Reversal
If your business makes both taxable and exempt supplies, ITC on common inputs must be proportionally reversed under Rule 42.
Understanding ITC Reversal — Why the Government Takes Back Your Credit
ITC reversal is one of the most confusing parts of GST compliance. You buy something for your business, pay GST on it, claim the credit — and then find out months later that you have to reverse it. This happens because the CGST Act has strict rules about what qualifies for ITC.
There are two main reasons for reversal: permanent blocks under Section 17(5) where certain categories of purchases can never claim ITC (like cars for most businesses), and proportional reversals under Rule 42/43 where you use common inputs for both taxable and exempt supplies.
Getting this wrong is expensive. If you claim ITC that should have been reversed, the department charges 24% interest per annum on the excess claim — and you face potential scrutiny action. Use this calculator to check before you claim.
Rule 42 Formula Explained
Common Credit = Total ITC − Blocked ITC (Section 17(5)) Exempt Ratio = Exempt Turnover / Total Turnover Rule 42 Reversal = Common Credit × Exempt Ratio Net Eligible ITC = Total ITC − Blocked ITC − Rule 42 Reversal
This calculation must be done monthly (provisionally) and then reconciled annually. The annual reconciliation can result in additional reversal or credit, depending on whether the actual exempt-to-total ratio differs from the monthly estimates.
Frequently Asked Questions
What is ITC reversal under GST?▼
ITC reversal means returning the Input Tax Credit you claimed on purchases. This happens when credit is blocked under Section 17(5), when inputs are used for exempt supplies (Rule 42), when a supplier defaults on tax payment, or when goods are lost/destroyed.
Is ITC on office rent blocked?▼
No, ITC on commercial office rent is eligible. However, if the rented property is used for construction of immovable property (not plant & machinery), that portion of ITC would be blocked under Section 17(5)(d).
Can I claim ITC on employee meals at office?▼
No, food and beverages for employees are blocked under Section 17(5)(b)(i). Even if you provide meals at the office canteen, the GST paid on food purchases/catering cannot be claimed as ITC — unless your business is in the food/hospitality industry.
What happens if I do not reverse ITC?▼
If ITC that should have been reversed is not reversed, the department will demand the amount with 24% interest per annum and may impose penalties. During GSTR-9 annual return reconciliation or during scrutiny, such discrepancies are flagged.