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Claiming Input Tax Credit on Capital Goods – Query regarding

Amin (Partner) (82 Points)

19 November 2022

We are GST registered Dealer fabricating Men’s Shirt on Job work . Our output of Men’s Shirt is 100% GST charegeble. We understand on Capital goods that are used to produce taxable goods we have two option 1) Claim ITC in the month of purchase and Reverse ITC 1/60^th portion of ITC every month taking working life of the Machine for 60 months i.e. five years , plus usual depreciation and another option is 2) to book capital goods with cost of machine plus ITC and claim depreciation on gross amount every year . Our query number one is whether our understaing as stated above is correct ? another query is ITC which we do not claim on capital goods, in which table of GSTR 3B should be reported as reversed

Wll be obliged to hear and have guidance. Thanks.

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3 Replies

Rajendra Prasad (Employee Private) (1824 Points)
Replied 19 November 2022

You can avail input credit 100% on Capital goods which has been intended for produce taxable goods on the same month as and when purchased. There is no any restriction.

The system which has been discussed in your query is, as and when you have been sold your Capital Goods, then has to reverse the ITC availed by reducing the higher of either 5% per quarter for the period which has been used, or the GST on Taxable value which has been received as sale consideration of sold Capital Goods

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kl Bhavana (Student CA Final ) (417 Points)
Replied 19 November 2022

There is no restriction to avail ITC on Capex, youcan avail 100% of ITC on Capex subjected to the provisions of sec 16 of CGST Act,( like received the goods, have valid invoice copy, reflecting in GSTR 2A/ 2B, Payment made to Govt, Payment made to supplier)

Query No.1

Scenario:1
Reversal of ITC on Capex, this situation will arise only when the Asset is sold by the tax payer, who has utilised the capex for both taxable and exempt supplies , business and other than business purposes.

If you are purely involved in taxable supplies, reversal of ITC is not applicable.

Scenario:2
If tax component is capitalised in books, then tax payer is not allowed to avail ITC on the same.

Query :2

Ideally, ITC that is claimed only shall show in Table 4A(5) of GSTR 3B.

If you fall under category to reverse the ITC on Capex already availed in previous months shall be reported under Table 4B(2) : Other Reversals

Hope this helps

If you need further assistance please reach out to bhavana @ lbkca.in
narasimha @ lbkaca.in
contact @ lbkca.in

LBK & Associates
Chartered Accountants
Bangalore

Amin (Partner) (82 Points)
Replied 20 November 2022

Thanks for propmpt reply.

As you mentioned ……”Scenario:2 If tax component is capitalised in books, then tax payer is not allowed to avail ITC on the same.

Good, We do not claim ITC input on Capital goods ( used for 100% Taxable services Job work) and capitalise purchase price of Machine Rs.100/- + cgst 9% + sgst 9% total Rs.118/-debited to fixed assests.and claim depreciation as per IT provisions on Rs.118/-

In our 2B Electronic Credit register Rs.18/- will get popped up.in the month of purchase

By recent advisory see attachment the GST deptt says to state compulsorily full popped up in table 4A . The query is where in 3B this Rs.18/- will be reversed . whether in TABLE 4 (B) (1) i.e permanent ineligible ITC OR in TABLE 4 (B) (2) which not permanently in nature

Sorry for bothering you,

M Amin

Attached File : 1191968 20221120013121 report in 3b.jpg downloaded: 39 times