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)

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)

31 January 2023 No. ITC of VAT of machine is not eligible, because of zero rated supply.

JR Engineering

JR Engineering (Querist)

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)

31 January 2023 Whether the machine is used form manufacturing any product having outward VAT liability?

JR Engineering

JR Engineering (Querist)

31 January 2023 Almost all the time the machine was and is used for manufacturing with VAT goods only

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

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

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