15 March 2024
Capital Assets/ goods input is completely taken during the combined service and reversed within the next 60 months. Currently providing services that are fully taxable, so it's important to determine whether the capital input credit needs to be reversed throughout the reaming period. Kindly give advice and suggestions regarding the right way of reversal input credit.
For example, capital assets purchased in 2018–2019, input took in full, and reversal credit in the next 60 months .we are offering combination services until FY 2022–2023 and completely taxable services starting in FY 2023–2024. Can we liable for input credit reversals for capital assets during the Remain period?
06 July 2024
Based on your query, it seems you are concerned about the reversal of input tax credit (ITC) on capital goods under GST regulations. Here’s a breakdown of the key points and considerations:
1. **Reversal of Input Tax Credit on Capital Goods**: Under GST, when capital goods on which ITC has been claimed are partly used for taxable supplies and partly for exempt supplies or non-business purposes, ITC needs to be reversed proportionately. This reversal typically happens over a period of 60 months (5 years) from the date of invoice of the capital goods.
2. **Change in Nature of Supplies**: You mentioned a transition from providing a combination of taxable and exempt supplies to now offering fully taxable services from FY 2023–2024 onwards. Here’s how it impacts the reversal:
- **Fully Taxable Supplies**: If you are now exclusively providing fully taxable supplies from FY 2023–2024 onwards, you may not be required to continue reversing ITC on the capital goods. This is because there would no longer be any exempt supplies to trigger the need for reversal.
- **Remaining Reversal Period**: The reversal of ITC on capital goods is required for a total of 60 months. If you have already completed some reversal, you would need to continue reversing ITC for the remaining period unless all ITC has been fully reversed or you have switched to fully taxable supplies.
3. **Compliance and Documentation**: Ensure that you maintain proper records of the ITC reversal process. This includes keeping track of the dates of capital goods purchase, the amount of ITC claimed, and the schedule of ITC reversals over the 60-month period.
4. **Consultation with Tax Advisor**: Given the specific details of your business operations and GST compliance, it’s advisable to consult with a tax advisor or GST expert. They can provide personalized guidance based on your business activities and help ensure compliance with GST laws regarding ITC on capital goods.
By understanding these points and seeking appropriate professional advice, you can effectively manage the reversal of input tax credit on capital goods under GST, especially during transitions in your business operations from partially exempt to fully taxable supplies.
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