De Minimis Rule applied when the exempt inputs are less than 5% of exempt supplies.
When the De Minimis Rule is satisfied, the exempt supplies value needs to be lesser than or it has to be equivalent to: a) an average of about USD 40,000 on a monthly basis and b) five percent of the full value of all exempt and taxable supplies which had been made during that period.
When Would De Minimis Rule Be Satisfied?
So the question areas to what would happen when De Minimis Rule is satisfied. One might make claims for all of the input tax being incurred upon, when the De Minimis Rule is found to have been satisfied. This should exclude the disallowed input tax which comes under regulations twenty-six and twenty-seven of the GST (General) Regulations.
With regard to the input type of tax claims, they are being permitted provisionally only towards the end of each period of accounting which has been prescribed. However, one needs to do long-time adjustments by doing similar tests with regard to the input type of tax claims which has been done in the long-run.
When Would De Minimis Rule Be Not Satisfied?
In case the De Minimis rule is found to be not satisfactory, then one would not be directly permitted to make claims for input type of taxation which is attributed directly towards creating exempt supplies.
With regard to input tax which would not be considered as attributable directly to exempt or taxable supplies, the amount which could be claimed could be computed using this formula: Total allowable residual input tax would be equivalent to residual input tax multiplied by the value of the supplies taxable, divided by the value pertaining to the total supplies.