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As evident from revised draft, the definitions of the input goods, capital goods and input services have undergone a major change or let's say, it has been simplified to the maximum extent possible. In the current laws, there are definitions containing specifications and restrictions to items and services on which Cenvat can be taken or not. But in the new regime, these restrictions have been minimized. For e.g. the definition of input is given in sec 2(52) as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.

The definition of input service has been given in sec 2(53) as any service used or intended to be used by a supplier in the course or furtherance of business.

The definition of capital goods has been given in 2(19) as to means goods, the value of which is capitalized in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business.

Although this being a welcome step, it should also be looked into that what new issues can crop up due to this change? Earlier parts, accessories and components of capital goods were also classified as capital goods but now the consumables can't be treated as capital goods as they won't be capitalized. It is most probable that they will fall as residuary items in the definition of inputs.

Similarly, it has been stated that goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even when used in course or furtherance of business won't be eligible for availing Cenvat. But if the building is being capitalized then the inputs used in the building will be treated as capital goods and its Cenvat should be allowed.


 

Published by

Pradeep Jain
(F.C.A.)
Category GST   Report

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