Become a Certified GST Practitioner. Batch begins 18th Nov. Register Now!

Input on Capital Goods

13 June 2017

Whether input tax credit is available on capital goods if, goods produced by manufacturing unit become taxable in gst regime and it was exempt under excise and vat.

Reply
Follow
Share

11 Replies

Preeti (Team_GSTSoln) (Team GST Experts) (1926 Points)
Replied 13 June 2017

no if capital goods purchased is exempted under existing law, then no itc available to carry forward. for more info https://www.gstsoln.com/all-about-transitional-provisions-us-140-compiled-with-relevant-rules-in-general-language-from-business-point/

Upgrade to CAclubindia Pro. Subscribe Now!

Ramandeep Singh (Article) (40 Points)
Replied 14 June 2017

not capital goods were exempted, query is about product A is produced using capital goods

Preeti (Team_GSTSoln) (Team GST Experts) (1926 Points)
Replied 14 June 2017

Ni ramandeep u cant take credit of goods exempted

Ramandeep Singh (Article) (40 Points)
Replied 14 June 2017

let it be more clear,
eg. 1) I have purchase machinery amouting Rs.110000 (base amount 100000 plus 10000 taxes) ,
2) capitalised machinery with Rs.1.1L in books.( not availed credit)
3) Goods which are produced using machinery is exempt under current tax regime .
4) Under GSt goods are now become taxable .
5) So can I avail input of Rs. 10000 ?
6) Machinery is used for one year only

Waiting for your valuable reply.
Thanks

Preeti (Team_GSTSoln) (Team GST Experts) (1926 Points)
Replied 14 June 2017

No raman u cant take credit of 10000

Upgrade to CAclubindia Pro. Subscribe Now!

Ramandeep Singh (Article) (40 Points)
Replied 14 June 2017

https://cleartax.in/s/itc-rules-capital-goods-gst ( Refer Point E from link ).

(this point is still create confusing)

E. Where a capital good which was earlier used or intended to be exclusively used for:

Non- business purpose
Effecting exempt supplies

Later to be used commonly for:

Business and non-business purpose
Effecting taxable and exempt supplies

Input tax to be credited to electronic credit ledger would be:

= Input Tax – 5% of Input tax for every quarter or part thereof

Let us understand the situation through an example

Mr. Avinash bought a Capital Good intended to be used for effecting exempt supplies only, for Rs 1,00,000/- paying Rs 18,000 as input tax on 01/04/2017 and now on 15/11/2018 he wishes to use the capital good commonly for taxable and exempt supplies.

Now the eligible common input tax credit will be calculated as follows

= Input Tax – 5% of Input tax for every quarter or part thereof

= 18,000 – 5% of 18000 * 3 quarters

= 18,000 – 2,700

= 15,300

Now Mr. Avinash will credit Rs 15,300 to Electronic Credit ledger and follow the steps shown in point D to calculate the input tax attributable to exempt supplies out of common credit

Anil (CEO) (27 Points)
Replied 30 June 2017

A manufacturer producing excisable goods but availing excise exemption (below 1.5 crore), purchases a machine for production of these goods in 16-17. He has taken input VAT credit in 16-17. Now under GST he wants to claim the component of excise paid on the machine as he will be producing goods which attract GST. Please tell procedure, forms, % of credit possible.

Lalit Nagpal (Assistant Manager) (541 Points)
Replied 30 June 2017

Section 16(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed.

Preeti (Team_GSTSoln) (Team GST Experts) (1926 Points)
Replied 30 June 2017

RAMANDEEP THIS EX RELATES TO MACHINERY USE IN GST REGIME, AND YOU ARE ASKING FOR TRANSITION PERIOD. BOTH ARE TOTALLY DIFFERNT

Preeti (Team_GSTSoln) (Team GST Experts) (1926 Points)
Replied 30 June 2017

ANIL HE CANT TAKE EXCISE COMPONENT OF MACHINERY

Upgrade to CAclubindia Pro. Subscribe Now!

Anil (CEO) (27 Points)
Replied 01 July 2017

Section 18(1)(d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable. Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.

1) I would like to confirm whether a machine which was purchased in 16-17 for which excise was paid but not claimed under senvat credit as the manufacturer was availaing SSI exemption. the machine was used for manufactur of exempt goods on the day immediately preceding the date of implematation of GST. The goods are taxable now in GST (IGST + SGST).

2) Further what will be reduction in ITC for machine purchased in Nov 2016 and installed in Feb 2017, comissioned in June 2017. The ITC of VAT already claimed in 16-17. The depreciation is claimed on basic cost excluding Excise and VAT.