Itc on capital goods

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Anshuman Basu (Querist)

23 January 2019 Sir Please clarify the following Question
1.If a company deal only EXEMPTED SUPPLY, and the company purchase machinery (Capital Goods) then the company eligible to claim ITC in single shot, or claim ITC over the life of 5 Year?
2.If a company deal only TAXABLE SUPPLY, and the company purchase machinery (Capital Goods) then the company eligible to claim ITC in single shot, or claim ITC over the life of 5 Year?
3.If a company deal PARTLY TAXABLE SUPPLY AND PARTLY EXEMPTED SUPPLY, and the company purchase machinery (Capital Goods) then the company eligible to claim ITC in single shot, or claim ITC over the life of 5 Year?

Rajesh Kumar

Rajesh Kumar (Expert)

24 January 2019 1. If a company deals only in exempted supply, it is not eligible for any ITC credit. Therefore, the company should take depreciation under Income Tax law even with respect to GST paid.
2. If a company deals in taxable supply only, it should take ITC credit of GST paid. It has to be taken immediately. The company shall not take GST amount in the value of capital goods for the purposes of depreciation under Income Tax Act.
3. If the company deals in exempted and taxable supply, it should take proportional ITC credit; and claim depreciation of rest of the amount in Income Tax.
ITC is always taken in single shot. 5 years period is there in Income Tax laws where one is claiming depreciation. The only thing one has to keep in mind that depreciation under Income Tax laws shall not be claimed of the amount of which ITC credit has been taken.

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Anshuman Basu

Anshuman Basu (Querist)

24 January 2019 sir I am not understand the meaning o f'' ...If the company deals in exempted and taxable supply/service, it should take proportional ITC credit; and claim depreciation of rest of the amount in Income Tax.
ITC is always taken in single shot. 5 years period is there in Income Tax laws where one is claiming depreciation. The only thing one has to keep in mind that depreciation under Income Tax laws shall not be claimed of the amount of which ITC credit has been taken.''
please explain details

Rajesh Kumar

Rajesh Kumar (Expert)

24 January 2019 You are getting confused with ITC and Depreciation. In income tax, you get depreciation; under GST you get ITC. You always get ITC immediately, there is no provision of getting ITC in stages. Depreciation you get in satges as per rates notified in Income Tax Act. The only restriction is that you will not get depreciation of ITC amount.
For example, you brought CG for Rs. 100, GST paid Rs. 18, total 118. If you are not taking any credit, you will get depreciation for complete Rs. 118. If you are taking full credit, you will get depreciation on Rs. 100. If you taking partial credit say of Rs. 8, you will get depreciation on Rs. 110.

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