GST ITC Reversal on Capital Goods: Rule 43 Made Simple
The 60-month formula for reversing input tax credit on capital goods, common exempt-supply mistakes, and how to tie the reversal back to your fixed asset register.
Rule 43 of the CGST Rules governs input tax credit on capital goods used partly for business and partly for exempt supplies — and it applies whenever a capital asset on which ITC was claimed is later sold, transferred or written off before 60 months are up.
The 60-month rule
Capital goods are treated as having a useful life of 60 months (five years) for ITC purposes. If you dispose of or write off such an asset before 60 months, you reverse the ITC attributable to the remaining life: reversal = ITC claimed × remaining months ÷ 60.
Where teams go wrong
- Forgetting the reversal entirely when an asset is scrapped or sold mid-life.
- Counting months incorrectly — the count runs from the date the credit was availed.
- Not reflecting the reversal in GSTR-3B Table 4B, or not documenting the working for audit.
AssetOS ties disposals to the register in real time and generates a GST ITC Reversal (Rule 43) report — computing GST × remaining months ÷ 60 for every capital asset removed before 60 months, so nothing slips through.