Dear experts, 

  I want to know whether 100% VAT input credit on capital goods allowed under The Delhi VAT Act ?

Actual Case

While in audit of a client I found company had purchased furnitures in september 2010 and January 2011 on which they have taken input VAT credit of 2,60,000 (i.e. 100% VAT charged on invoice) in last quarter. Further some assets are transfered to Ludhiana for branch use.

My Observation On This- As per The Delhi VAT Act Section-9 (9) ITC on vat should be allowed in 3 insatllments. So one can take 1/3rd credit in one year. Further Section 9 (10) clause (3) it has been mentioned VAT in put will be reversed propertionately on Branch Transfer out of Delhi other than by way of sale.

Action To Be Taken- The Vat credit on branch transfered assets will be reversed 100%. For Assets used in delhi 2/3rd will be reversed. 

Doubts-If my observation is right then-:

1-Whether the client has to revise his return after depositing balance VAT ?

2-What will be done on returns for assets purchased in 2nd Quarter ? 


3-What is the rate of interest on late deposit of VAT


4-Wheter on assets purchased in F/Y 09-10 on which credit not taken can be taken(adjustment purpose) in F/Y 10/11

5- Whether VAT credit on Works Contaract for renovation and repairing works done in Show rooms of client can be taken.

(The said company is a trading company. It only imports cosmetic products and sells here in Delhi (H.O.). It has only One branch in ludhiana and sells on CST to other corporate clients all over INDIA)




furnitures are in negative list of vat, it does not get used as capital goods towards the manufacture or trade, so input credit is strictly not allowed. 

they have to pay the tax and revise return immediately.

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 (See section 9)

List of Non-Creditable Goods


Sl. No.

Descripttion of Non-Creditable Goods


Subject to clauses 2 and 3 of this Schedule, the following goods shall be “non-creditable goods” for the purposes of this Act:



All automobiles including commercial vehicles, and two and three wheelers, and spare parts for repairs and maintenance and tyres and tubes thereof;]


[2] [(ii)

Fuels in the form of petrol, diesel, kerosene, LPG, CNG, PNG and coal;]



Conventional clothing and footwear, clothing fabrics;



Food for human consumption;



Beverages for human consumption;



Goods designed, and used predominantly for, the provision of entertainment including television receivers, video cassette players, radios, stereo systems, audio cassette player, CD players, DVD players, computer game consoles and computer games, cameras of any kind;



Air conditioners, air conditioning plants or units other than those used for manufacturing purposes; air coolers, fans and air circulators;]



Tobacco in any form and tobacco products.



Office equipments, furniture, carpets, stationary items, advertisement and publicity materials, sanitation equipments, fixtures including electrical fixtures and fittings, generators and electrical installation;



Elevators (lifts);



Computers other than those used for the purpose in normal business;



All kinds of cranes, earthmovers, JCB, excavators, road rollers, concrete mixing machines and other similar machineries;



Goods for personal consumption or for gifts;



Goods purchased and accounted for in business but utilised for the facility to the employees; and



Goods used for construction of or incorporation in civil structures and immovable goods or properties not constituting part of the works contracts.]

[1] Substituted vide Notification No. F.(59)/Fin(T&E)/2005-06/913 kha dated 30.11.2005 for “(i) Motor vehicles designed for transporting fewer than eight passengers, motor   cycles, motor scooters and other motorised two-wheeled vehicles;”.

[2] Substituted vide Notification No.F.3(22)/Fin.(T&E)/2006-07/dsfte/384-393 dated 07.09.2006 w.e.f. 7th September, 2006 for “(ii) Fuels in the form of petrol, diesel and kerosene, LPG, CNG, coal;”.

[3] Substituted vide Notification No. F.(59)/Fin(T&E)/2005-06/913 kha dated 30.11.2005 for “(vii)  Air conditioners other than those used for manufacturing purposes; and”.

[4] Inserted vide Notification No. F.(59)/Fin(T&E)/2005-06/913 kha dated 30.11.2005.

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Thanks Mr. U S Sharma .

Please clarify whether VAT charged on works contract for renovation of stores is eligible for VAT credit ?


store is not a capital goods, hence input credit not applicable, 


Capital goods are assets but not all assets are capital goods.

capital goods are meant for any plant and machinery, tools & impliments, used in the factory of production for or in relation to manufacture of taxable output, but excluding office equipment, furniture and fixatures, car and vehicles, electrical wiring and electronics.


Sir Thanks once again. 

As per Delhi VAT act section2 (f) the line is reproduced below-


f. capital goods means plant, machinery and equipment used, directly or indirectly, in the process of trade or manufacturing or for execution of works contract in Delhi;

The works contract given for renovating a new show room store where some materials like glass fittings etc. are used by the contractor and on gross bill he charged VAT. Now the company has to capitalise this expenditure. My question is whether the bill on which VAT charged by contractor will be eligible for input credit ?


capital goods means plant, machinery and equipment used, directly or indirectly, in the process of trade or manufacturing or for execution of works contract in Delhi;


can the dealer classify the renovated showroom under "plant / machinery and equipment used directly or indirectly in the process or trade or manufacturing"? if he can then input credit would be available. as the works contracter was eligible for input credit of glass, wood, ply wood, fastener, tools etc, not the show room owner.

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Thank you Mr. U.S. Sharma for giving the solution.

Yes the client can classify as the stores are used exclusively for trading purposes. 


store is used for trading , its not capital goods or input for manufature or works contract, so input credit not available for any activify of stores.


If input on capital Goods is not taken in Previous year then it can be utilised in Current year ? clarify me.




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