ITC on Capital Goods used for normal sales

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This discussion clarifies the rules for claiming Input Tax Credit (ITC) on capital goods used for business purposes. You can claim the full ITC at the time of purchase if the goods are used to further your business. However, if you sell these capital goods within five years of purchase, you'll need to reverse a proportionate amount of the ITC claimed.

Mahesh Sakharkar

Mahesh Sakharkar (Querist)

20 February 2020 Hello sir/Madam,

Can anyone explain me the treatment of availing input tax credit in case of capital goods used for business purpose ?
And ITC on useful life will be taken as 5 years is applicable to me in case Capital Goods used for normal sales.

Thanks...

Amol S Joglekar

Amol S Joglekar (Expert)

20 February 2020 if you are using the capital goods for the business purpose, please check if they are for the furtherance of your business. If yes, then you can avail ITC on the same.

CA Anita Bhadra

CA Anita Bhadra (Expert)

20 February 2020 Full ITC can be taken at the time of purchase.
In case you sell within 5 years of purchase, proportionate ITC needs to be reversed.
For example - if you purchase a capital asset in Feb 2020 and take ITC of 18000 and sell the same assets after 2 years . You need to reverse 10800 ( unutilised credit for balance life of the asset(18000*3/5)

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