Capitalisation of Fixed Assets!!!Urgent!!!

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This query is : Resolved

Rajesh (Querist)

16 July 2010 Dear Experts,
On the company which i am auditing they have capitalised the CENVAT and VAT paid for the fixed assets. For the 2nd year while claiming depreciation they have also claimed including the CENVAT and VAT. As per my knowledge CENVAT and VAT should not be capitalised and it has to be reversed.

2nd doubt is Whether VAT paid for capital goods can be used to set-off the VAT payable by the company. For Example VAT liability comes for Rs. 140 and VAT input credit available is Rs.100 and VAT input credit for capital goods is rs. 10. Is it sufficient the company pays Rs.30 for VAT tax.

Pls. clarify me
With regards,
Rajesh

jegannath G

jegannath G (Expert)

17 July 2010 CENVAT & VAT should be netted off and claim depreciation which is universal procedure as you take credit.

If you are not eligible for Cenvat / VAT credit and gross amount incl VAT/Cenvat can be used for computing depreciation & for capitalisation.

VAT credit on capital goods are followed differently in different states.Yes definitely , you can adjust against the VAT payable but to the extent specified in the concerned State VAT Act.

Exactly the VAT Payable to Government is Rs 30/- But in TN the VAT Credit on Capital goods can be claimed only 50% in the first year & balance in the next year

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