ITC under Karnataka VAT

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A sheet metal manufacturer in Bangalore, operating under Karnataka VAT and Service Tax, inquired about claiming Input Tax Credit (ITC) on a laser cutting machine purchased in 2017. While the machine is used for manufacturing goods with VAT liability, the initial response suggested ITC might not be eligible due to zero-rated supplies. However, clarification indicated that ITC can be claimed proportionally based on the machine's usage for manufacturing goods intended for sale.

JR Engineering

JR Engineering (Querist)
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30 January 2023 Dear Sir,
We are a sheet metal manufacturing unit in Bangalore. Purchased a Laser Cutting machine in April, 2017. We do sales of sheet metal products and also provide services of laser cutting or bending only, i.e. job-work. We are under Service Tax. Labour charges under KVAT are zero-rated sales but we include Service Tax in the Invoice to our clients. Will I be able to avail full ITC of the machinery purchase ? Thanks, Ramesh

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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31 January 2023 No. ITC of VAT of machine is not eligible, because of zero rated supply.

JR Engineering

JR Engineering (Querist)
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31 January 2023 Thank you for your reply Sir... we are also doing manufacturing sales, hence i presumed we should be able to avail ITC ... thanks for the info

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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31 January 2023 Whether the machine is used form manufacturing any product having outward VAT liability?

JR Engineering

JR Engineering (Querist)
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31 January 2023 Almost all the time the machine was and is used for manufacturing with VAT goods only

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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31 January 2023 Depending upon the usage on manufacturing sheets for sale, you can take ITC credit in proportion.

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