UTILIZATION ITC ON CAPITAL GOODS

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This discussion clarifies the rules for claiming Input Tax Credit (ITC) on capital goods. It addresses whether the full ITC can be claimed at the time of purchase or if it must be spread over 60 months. The consensus is that full ITC is generally available at purchase, but a portion may need to be reversed upon sale based on the remaining useful life of the asset.

Bobby

Bobby (Querist)

17 February 2020 TAX ON SALES ---- 1,00,000
Less: input tax(inputs)- 40,000
itc(capital goods)- 60,000
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NET LIABILITY -NIL-
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MY DOUBTS WAS WHETER I CAN TAKE WHOLE ITC ON CAPITAL GOODS i.e. Rs. 60,000/- OR Only Rs. 1,000 (60,000/60 months). and pay remauning Net Tax Liablity Rs.59,000/-

pls Clarify.

CA Anita Bhadra

CA Anita Bhadra (Expert)

17 February 2020 It depends when you had purchased that Capital Good. The useful life of Capital Good for the purpose of ITC claim is 60 months,
For example, if you had purchase capital good 36 months ( 3 years ) before. The balance useful life of the asset is 24 months.
You need to reverse ITC - (60000/60) * 24 = 24000/-. ( You must have already availed ITC 60000/- at the time of purchase of capital goods. Now you need to reverse 24000/- at the time of sale of thatcapital goods

Gokul Sharma

Gokul Sharma (Expert)

17 February 2020 yes take full itc at the time of purchase and if sold in future 5 years you have to reverse the itc as per gst rules.

Bobby

Bobby (Querist)

17 February 2020 Thank u for ur reply...actually itc was on construction ice plant. i have claimed the itc portion on plant & machinery only, which was accumulated monthly as per gstr-3b returns., becoz there is no sale due to factory under construction. the sale activity begins in this month.the accumulated itc was around 15 lacs. can i use all this itc for payment of output tax untill all the accumulated itc get exhausted or I will utilize only 1/60 portion for each month and balance paid in cash

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