1. whether can we Claim Capital Goods ITC fully in the month of procurement and installed or will be spread and claimed in next 60 months from the date of invoice. (Note the capital good is used in the production process of taxable goods alone and no exempted supplies will be produced.)
The machine is intended to procure in Jan2022 and install in Feb2022 how would be claim the ITC on the machine. The supplier will enter the whole credit in the month Jan2022 GSTR1. What will be the correct procedure to claim the ITC?
2. We have doubt about that the Rule 43 of CGST ACT restricts/ deals with only reversal of credit of ITC on Capital goods used for exempted supplies and not for capital goods entirely used for production of taxable supplies.
06 July 2024
Let's clarify your queries regarding the Input Tax Credit (ITC) on capital goods under GST:
1. **Claiming Capital Goods ITC:** - **Full ITC in the Month of Procurement and Installation:** Yes, you can claim the entire ITC on capital goods in the month when the goods are both procured and installed, provided all other conditions for claiming ITC are met (like possession of tax invoice and receipt of goods). Since your machine is intended to be procured in January 2022 and installed in February 2022, you can claim the ITC in the month of February 2022 when both procurement and installation are completed.
- **Procedure to Claim ITC:** Here's the step-by-step procedure: - Ensure you receive the tax invoice from the supplier for the capital goods. - Make sure the supplier includes this transaction in their GSTR-1 for January 2022 (assuming procurement). - You can claim the ITC for this invoice in your February 2022 GST return (GSTR-3B), which typically needs to be filed by the 20th of March 2022. - Enter the full amount of ITC from the tax invoice in your GSTR-3B for February 2022.
2. **Rule 43 of CGST Act:** - **Applicability:** Rule 43 of the CGST Rules primarily deals with the reversal of ITC related to capital goods when there is a change in the intended use of capital goods from exempt to taxable or vice versa. - **Reversal for Exempt Supplies:** If capital goods are used for making both taxable and exempt supplies, proportionate ITC reversal is required under Rule 43. However, if the capital goods are solely used for taxable supplies (as in your case), Rule 43 does not apply for the purpose of reversal of ITC. - **Your Situation:** Since your capital goods are intended solely for the production of taxable goods and not for any exempted supplies, Rule 43 would not mandate any reversal of ITC.
In summary, you can claim the full ITC on capital goods in the month of February 2022 when both procurement and installation are completed, as long as all other conditions for claiming ITC are fulfilled. Rule 43 of the CGST Act does not apply in your case since the capital goods are exclusively used for taxable supplies.
CAclubindia
