VAT Input Credit

This query is : Resolved

Share Report Follow Query Ask a Query

Subrahmanyam

Subrahmanyam (Querist)
Follow

10 December 2009 Is VAT Input Credit on Capital Asset purchased available for set-off with VAT payable on sales...

ADITYA

ADITYA (Expert)
Follow

11 December 2009 You have to reduce the Cost of Capital Asset purchased to the tune of VAT SET-OFF

Subrahmanyam

Subrahmanyam (Querist)
Follow

11 December 2009 I did not get your point...Lets say the cost of the asset is 1,00,000 & the VAT on the same is say 12500, the cost of the asset wil be shown as 1,00,000 in the books & can the VAT input of 12500 be set-off against the VAT payable on Sales..?

Subrahmanyam

Subrahmanyam (Querist)
Follow

23 December 2009 Someone pls clarify

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

02 August 2025 Got it! Here’s a clear explanation for your question about VAT input credit on capital assets:

---

### Your scenario:

* Cost of asset (excluding VAT): ₹1,00,000
* VAT paid on asset: ₹12,500
* Question: Can the ₹12,500 VAT paid be set off against VAT payable on sales?

---

### Explanation:

1. **Accounting Treatment:**

* The **cost of the asset** in your books is **₹1,00,000 (excluding VAT)**.
* VAT paid (₹12,500) is **not added to the asset cost** in accounting; it's treated separately as input VAT.

2. **VAT Input Credit:**

* Yes, you **can claim input VAT credit** of ₹12,500 on the purchase of the capital asset.
* This input VAT credit can be **set off against your output VAT payable on sales**.

3. **Reduction of Asset Cost:**

* The statement “reduce the cost of capital asset purchased to the tune of VAT set-off” means you don’t capitalize VAT as part of the asset cost.
* The asset remains recorded at ₹1,00,000 (net of VAT), and VAT paid is adjusted in your VAT returns.

4. **Claiming the Credit:**

* Usually, VAT on capital goods can be claimed **either fully in the same VAT return or spread over a period (like 3 years)**, depending on the state VAT law.
* The credit reduces your VAT liability.

---

### Summary:

* You **do not add VAT amount to the asset cost in books**.
* You **can set off VAT input credit (₹12,500) against VAT output payable**.
* Make sure to follow your **state’s specific rules on capital goods VAT credit**, as some states allow installment claims.

---

If you want, I can help find the exact rule reference from your state VAT law for capital goods credit. Would you like that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

SARAVANAN PALANISAMY

Vishnu Agarwal

SHUBHANGI GOEL

Shivchandra Jakhotia

CA Lalit Kumar Agrawal

Subscribe Now

VAT Input Credit

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA