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VAT CREDIT ON CAPITAL ITEMS

soni chauhan (Service) (670 Points)

19 March 2010

How vat credit can be availed on capital goods?

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4 Replies

Jagan Mohan Rao, Nerella (Retired DCTO) (49 Points)
Replied 08 May 2010

Yes you can Clain

alok k garg (prop) (25 Points)
Replied 08 May 2010

Dear ,

input tax credit on capital goods can be claimed in three successive annual equal installments and shall be claimed in the first return of tax period of the assessment year.First such installment can be claimed in the return of first tax period of the assessment year succeeding the assessment year in which capital goods liable to input tax credit have been purchased and subsequent installements shall be claimed in the return of first tax period of subsequent assessment year.

For Example: I have purchased a machine for manufacturing goods in the factory for RS. 200000/- vat rate 5% tax is 10000/- on 25-12-2009.

in this case first installment of ITC capital goods can be claimed in A/Y 2010-2011 RS 3333/- IN the return of April 2010 REturn if my tax period is Monthly. Rest two installments can be claimed in April 2011 and April2012.

CA Sandhya S (Chartered Accountant) (130 Points)
Replied 27 September 2010

Hi,

Is there any circular or notification for this??

If so can you please send it to me @ sndya.sresh @ gmail.com

Thanks in advance

Anand (Chartered Accountant) (166 Points)
Replied 28 September 2010

Dear

See the section 9 (9) of Delhi Value Added Tax Act.

(9)(a)Notwithstanding anything contained to the contrary in sub-sections (1) and (3) and subject to sub-section (2), tax credit in respect of capital goods shall be allowed as follows

(i) 1/3^rd of the input tax on such capital goods, in the same tax period, in which tax credits arises

(ii) Balance 2/3^rd of such input tax in equal proportions in two immediately successive financial years

Provided that, where the dealer sells such capital goods, the dealer shall be allowed as tax credit, the balance amount of the input tax, if any, in respect of such capital goods as has not been earlier availed as tax credit. Such tax credit shall be allowed in the tax period in which such capital goods are sold and only after adjusting the output tax payable by him.

Provided further that, where the dealer exports from Delhi such capital goods otherwise than by way of sale, the dealer shall be allowed as tax credit, the balance amount of the input tax, if any, in respect of such capital goods as has not been availed earlier as tax credit, in the tax period in which the such capital goods are transferred and as reduced by the prescribed percentage of the purchase price of such capital goods.

Provided further that, no tax credit in respect of capital goods shall be allowed if such capital goods are used exclusively for the purpose of making sale of exempted goods.

Provided further that no tax credit in respect of capital goods shall be allowed on that part of the value of such capital goods which represents the amount of input tax on such capital goods, which the dealer claims as depreciation under section 32 of the Income Tax Act, 1961 (43 of 1961).

(b) If any capital goods in respect of which tax credit is allowed under sub-section (9)(a) is transferred to any other person otherwise than by way of sale at the fair market value before the expiry of a period of 5 years from the date of purchase, the tax credit claimed in respect of such purchase shall be reduced in the tax period during which such transfer takes place.