When an exempt supply becomes taxable supply then in such case credit on inputs and capital goods exclusively used for such exempted supply is eligible? What about input tax credit pertaining to capital goods used for both taxable and exempt supply?

1. In terms of Section 18(1) (d) of the Act, where an exempt supply made by a person becomes taxable supply, such a person will be entitled to claim credit of tax paid on stock held (inputs, semi-finished goods or finished goods) relatable to exempt supply and on the capital goods exclusively used for exempt supply preceding the day when the supply becomes taxable.
2. The credit of capital goods shall, however, stand reduced by 5 percentage points for every quarter or part thereof from the date of the issue of the
   invoice for such goods.
3. However, tax paid on capital goods used for both, taxable and exempt supply will not be eligible as input tax credit.

(ICAI FAQ PUBLICATION 06-09-2017 -: Availability of Credit in special circumstances: FAQ NO.27)