we are in a company selling 4 products out which three products are exempted and one is taxable
proportion on an average = 98 % exempted and 2% taxable
We are going to sell an asset ( Specialised Computerised device purchased two years back , No ITC being availed then ) now we are going to sell this equipment , GST needs to be charged on the transaction value . I have following questions o this
1 . Shall we utilise the Credit of proportionate ITC of the same asset when purchased ( on after deducting the 5% per quarter )
2. If not shall we use the ITC of other assets which are currently purchased with out proportionation- ( assets used commonly for all products )
3 . If we are purchasing same kind of machinery/equipment from another company - shall we use the ITC of the same for discharging this without proportionation ?
07 July 2024
Here's a breakdown of your questions regarding GST implications on selling a specialised computerised device and the utilization of Input Tax Credit (ITC):
1. **Utilization of ITC on the Asset Being Sold**: - Since you are selling a specialised computerised device, and assuming no ITC was claimed at the time of purchase (which means it was used exclusively or predominantly for exempt supplies), you cannot utilize the ITC on this asset for discharging GST liability on its sale. - The ITC rules prohibit the use of credit for goods or services used exclusively for making exempt supplies.
2. **Utilization of ITC from Other Assets**: - You can utilize ITC accumulated from other assets that were used for making both taxable and exempt supplies. Since 98% of your products are exempt and only 2% are taxable, the ITC from assets used for both types of supplies can be proportionately used to discharge the GST liability on the sale of the specialised computerised device. - This proportionate use should be calculated based on the ratio of taxable turnover to the total turnover (taxable + exempt).
3. **Purchase of Similar Machinery from Another Company**: - If you purchase similar machinery or equipment that will be used for both taxable and exempt supplies, you can use the ITC from these purchases (without proportionation) to discharge the GST liability on the sale of the specialised computerised device. - Again, ensure that proper documentation and records are maintained to substantiate the use of ITC.
4. **Cash Payment for GST Liability**: - If you do not have sufficient ITC or prefer not to use ITC, you can pay the GST liability in cash. This is typically done through the GST payment portal using electronic cash ledger funds.
### Summary: - Utilize ITC from assets used for both taxable and exempt supplies to proportionately cover the GST liability on the sale of the specialised computerised device. - Ensure compliance with GST rules and maintain proper documentation to support your ITC utilization. - If necessary, make cash payments for any shortfall in ITC availability or if you choose not to use ITC.
Consulting with a tax advisor or GST consultant can provide tailored advice based on your specific business circumstances and GST compliance requirements.
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