Can I Claim refund of Capital goods itc?

The refund formula for inverted duty structure does not include capital goods & input services. 

Although considering the intention of the GST law and the rationale behind inverted duty structure refund, such credits must be eligible on a total basis, i.e. when total ITC > total tax payment on account of rate of tax of outward supply being lower, refund must be enabled. 

This ratio was upheld in favour of the assessee in Gujarat High Court in VKC Footsteps case. The refund can be litigated, although it is suggested to apply for the same and establish your claim to navigate time restriction on refund applications. For more please reach me at akshay @ hiregange.com 

Originally posted by : CA Akshay Hiregange
	The refund formula for inverted duty structure does not include capital goods & input services.  Although considering the intention of the GST law and the rationale behind inverted duty structure refund, such credits must be eligible on a total basis, i.e. when total ITC > total tax payment on account of rate of tax of outward supply being lower, refund must be enabled.  This ratio was upheld in favour of the assessee in Gujarat High Court in VKC Footsteps case. The refund can be litigated, although it is suggested to apply for the same and establish your claim to navigate time restriction on refund applications. For more please reach me at akshay @ hiregange.com

https://indiankanoon.org/doc/27435529/ 

LD/69/61, [2020-TIOL-1599-MAD-GST], Transtonnelstroy Afcons Joint Venture and Ors vs. Union of India and Ors, 21/09/2020

Section 54(3)(ii) of the CGST Act is held to be constitutionally valid. Rule 89 (5) of the CGST Rules, limiting the ITC only in respect of Inputs and not in respect of input services is held to be intra-vires Section 54(3)(ii) of the CGST Act. 

So only refund of only inputs available in case of inverted duty structure. 

Well then now we have contradictory HC rulings. Although this ruling considers VKC footsteps contentions, and even still dismisses them. Maybe resolved at SC next. Although, it is important to mention, the rulings speak only of input services and inputs and not capital goods.

But you cannot claim an input tax credit if you claim depreciation on the GST paid while purchasing the capital asset. Inputs are consumed while the final products are made and are treated as business expenses. But the capital goods(machinery) are not consumed when the final product is made.

Nisarg you may make the refund application and stake your claim, as this issue is expected to be resolved only at ther Supreme Court. Option to reverse under protest maybe explored, etc. Suggest you to take the services of a professional if values are high. May write to me at akshay @ hiregange.com.

You can only setoff Input against Output liability

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