Certainly! Let’s delve into the details of GST input tax credit (ITC) related to business fixed assets.
Eligibility for ITC on Fixed Assets:
You can claim ITC on the GST paid for purchasing fixed assets (such as machinery, equipment, furniture, etc.) if they are used for business purposes. The following conditions must be met:
The fixed asset should be used for making taxable supplies (i.e., goods or services that attract GST). The GST paid on the purchase of the fixed asset should be reflected in your GST return (GSTR-2A or GSTR-2B). The asset should not be used exclusively for exempt supplies (supplies that do not attract GST). You should have proper documentation (invoices, bills, etc.) to support the ITC claim.
Blocked Credits:
Certain situations restrict you from claiming ITC on fixed assets:
If the asset is used for personal purposes or non-business activities. If the asset falls under the category of blocked credits (e.g., motor vehicles, except for specific cases). If the asset is used for providing exempt supplies.
Distribution of ITC on Capital Goods:
For capital goods (which include fixed assets), ITC is distributed over multiple years. You can claim ITC in the year of purchase and distribute it over the useful life of the asset. The distribution is done based on the formula:ITC per month=Useful life (in months)Total ITC
Remember to maintain proper records
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