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ITC REVERSAL ON CAPITAL GOODS

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mahipal m. chande

217 Points Posted on 26 October 2020

PROPORTIONATE ITC ON CAPITAL GOODS HAS BEEN REVERSED ON ACCOUNT OF CAPITAL ASSET BEING USED FOR BOTH TAXABLE AS WELL AS EXEMPT SUPPLIES.

WHERE TO CHARGE SUCH REVERSAL - TO PROFIT AND LOSS ACCOUNT OR TO CAPITALIZE TO ASSET?

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Quick Summary

This discussion tackles the reversal of proportionate Input Tax Credit (ITC) on capital goods when they are used for both taxable and exempt supplies. The core question is whether this reversal should be charged to the Profit and Loss account or capitalised to the asset. The consensus leans towards capitalising it to the asset, treating it as a capital expenditure.