Reversal of input tax credit if goods become exempt or taxable person switches to composition scheme :
Where any registered taxable person who has availed of input tax credit switches over as a taxable person for paying tax under section 10 of CGST Act [composition scheme] or, where the goods and/or services supplied by him become wholly exempt, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage points as may be prescribed, on the day immediately preceding the date of such switch over or, as the case may be, the date of such exemption – section 18(4) of CGST Act.
After payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse -proviso to section 18(4) of CGST Act.
The amount payable under section 18(4) of CGST Act shall be calculated in such manner as may be prescribed – section 18(5) CGST Act.