INPUT CREDIT ON CAPITAL GOODS UNDER DELHI VALUE ADDED TAX
Tax Credit on Capital goods shall be available in the manner described under Section 9(9) of the DVAT Act, 2004 (hereinafter called the” ACT”)
Definition of Capital Goods:
“Capital goods” means plant, machinery and equipment used, directly or indirectly, in the process of trade or manufacturing or for execution of works contract in Delhi;]
The Section 9(9) lays down the following process for claiming credit on capital goods:
A. 1/3rd of the input tax on such capital goods arising in the tax period, in the same tax period;
B. Balance 2/3rd of such input tax, in equal proportions, in corresponding tax periods, in two immediately successive financial years
The Tax Credit shall not be allowed:
A. In the case of the purchase of goods from a Unregistered dealer;
B. For the purchase of non-creditable goods (THE SEVENTH SCHEDULE);
C. For the purchase of goods which are to be incorporated into the structure of a building owned or occupied by the person;
D. Goods purchased from a Composition Dealer;
E. Goods purchased from Casual Dealer;
F. To the dealers or class of dealers specified in the Vth Schedule except the entry no.1 of the said Schedule i.e. CSD Stores;
G. To the dealers unless the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period.
H. In respect of capital goods if such capital goods are used exclusively for the purpose of making sale of exempted goods specified in the first schedule:
I. No tax credit in respect of capital goods shall be allowed on that part of the value of such capital goods which represents the amount of input tax on such capital goods, which the dealer claims as depreciation under section 32 of the Income Tax Act, 1961 (43 of 1961).
The items mentioned at Point No. C are Creditable goods if the said items are purchased either for resale in an unmodified form or for the performance of a works contracts on a building owned or occupied by another.
Let us try to decode the “THE SEVENTH SCHEDULE” which contains the non creditable items i.e. negative Capital Goods:
A. All automobiles including commercial vehicles, and two and three wheelers, and spare parts for repairs and maintenance and tyres and tubes thereof;
B. Fuels in the form of petrol, diesel, kerosene, LPG, CNG, PNG and coal;
C. Conventional clothing and footwear, clothing fabrics;
D. Food for human consumption;
E. Beverages for human consumption;
F. Goods designed, and used predominantly for, the provision of entertainment including television receivers, video cassette, players, radios, stereo systems, audio cassette player, CD players , DVD players, computer game consoles and computer games cameras of any kind;
G. Air conditioners, air conditioning plants or units other than those used for manufacturing purposes; air coolers, fans and air circulators;
H. Tobacco in any form and tobacco products.
I. Office equipments, furniture, carpets, stationary items, advertisement and publicity materials, sanitation equipments, fixtures including electrical fixtures and fittings, generators and electrical installation;
J. Elevators (lifts);
K. Computers other than those used for the purpose in normal business;
L. All kinds of cranes, earthmovers, JCB, excavators, road rollers, concrete mixing machines and other similar machineries;
M. Goods for personal consumption or for gifts;
N. Goods purchased and accounted for in business but utilized for the facility to the employees;
O. Goods used for construction of civil structures and immovable goods not constituting part of the works contracts;
The above list highlights many items as Negative Capital goods and credit of shall not be available under DVAT Act but the items mentioned from A to O [except item B, M, N and O] shall not to be treated as non-creditable goods if the items are purchased by registered dealers for the purpose of resale in an unmodified form or use as raw material for manufacturing of goods, in Delhi or for sale by him in the ordinary course of his business i.e. Trading.
Fuel shall be treated as creditable goods if the purchaser is licensed as a dealer in fuel products and purchases the fuel in commercial quantities for resale i.e. Indian Oil, HP and Bharat Petroleum etc.
By Vinod Kaushik,
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts have been made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules. The observations of the writer are personal view and the writers do not take responsibility of the same and this cannot be quoted before any authority in the present form.