Capital goods are assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services. Goods will be regarded as capital goods if the following conditions are satisfied:
(a) The value of such goods is capitalised in the books of account of the person claiming input tax credit;
(b) Such goods are used or intended to be used in the course or furtherance of business.
When you purchase anything, you are required to pay GST on it. Later, you can claim input Tax Credit on the GST paid on your purchases. SImilarly, when you are purchasing any Air Conditioner for your factory, you will pay the applicable GST rate. This GST paid can be claimed as credit in the same way as inputs. However, if you claim depreciation on the GST paid while purchasing the capital asset, you cannot claim input tax credit.