ITC on capital goods purchased for business use

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.

you can claim ITC input of capital good when you purchase , but should not be sold within 5 years from the date of purchase. any assets purchase on which GST input credit taken , if sod within 5 years from date of purchase the GST should reversed /paid will be higher of tax on actual sale value or 1/20th of ITC taken on purchase, for each remaining period of 5 years...

As per provisions of section 2 (19) of the Act, “Capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.


When capital goods are used exclusively for business purpose, input tax credit is available under GST. To be eligible to claim input tax credit on capital goods, the transaction has to be reflected in the GST return filing.

However, input tax credit on capital goods purchase is not available for capital goods used exclusively for effecting exempt supplies and for capital goods used exclusively for personal use.

Thank you so much to all. You guys clarified my doubt.

what happen if purchased in credit 36 installments. ITC to reversed being payment not made within 180 days

Originally posted by : Sri Sri
	what happen if purchased in credit 36 installments. ITC to reversed being payment not made within 180 days