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ITC on Asset Purchase for Zero Rated Purchase and Sales

rutuja prabhune (107 Points)

13 April 2020

Can a company claim ITC on its Asset Purchase, in case if its purchase and Sales is Zero Rated GST.

JFI: TDS-194j (10%) is applicable on company's Sales & Purchase

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CA Akshay Hiregange (Partner - Audit & Assistance) (4515 Points)
Replied 13 April 2020

Prima facie yes, subject to restriction u/s 17(5). As outward supply is zero rated (export or SEZ), refund could be applied under GST for accumulated ITC. Although, note, capital goods credit is not eligible for such refund, therefore, refund with payment of tax option is recommended to ensure tax optimsation.

194J is for services, do you mean the asset in this case is intanglible asset?

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(Guest)

Yes, company is eligible for claiming ITC subject to provision of section 16 and 17 of CGST act

Company is eligible for claiming refund of unutilised ITC under following grounds:

As per section 16 of IGST act, A registered person making zero rated supply have either of two options:
1) Supply under LUT or bond, without payment of tIGST and claim refund of unutilised ITC or
2) Supply on payment of IGST and claim refund of such tax paid

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rutuja prabhune (107 Points)
Replied 13 April 2020

Company Assets are tangible assets hardware software and office Furniture

CA Akshay Hiregange (Partner - Audit & Assistance) (4515 Points)
Replied 13 April 2020

Yes, ITC should be eligible fully. To ensure the refund is claimed, opt for with payment of tax (will be faster and easier). Although, ensure restrictions such as merchant export and other customs exemptions have not been claimed. Refer Rule 96(10) read with notification 16/2020.

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