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Itc on capital goods

ramesh (Accountant) (261 Points)

09 September 2012

please give a numerical example for how we can claim ITC on capital goods and how we set off it, is there any conditions for set off.

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 10 September 2012

Cenvat Credit on Capital Goods are allowed to the extent of 50% of the excise duty paid on such goods in the first financial year when these goods brought in the factory & the balance 50% can be taken in any subsequent financial year even if the goods are not installed in the factory.

For instance if the Excise Duty charged on capital Goods purchased & brought in the factory is say Rs 100000. Now the excise duty payable by you for the months is say Rs 200000. Then the Net excise duty payable would be 200000-(50% of Rs 100000) i.e. 200000-50000= 150000

Balance Rs 50000 can be availed in the any subsequent financial year.

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ramesh (Accountant) (261 Points)
Replied 10 September 2012

thank you sir, but i am asking for availing and utilisation of ITC i.r.o. VAT paid on capital goods.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 10 September 2012

It depends upon the state in whihc you are residing. For different states there are differnt rules for claiming ITC on capital goods. In some states 100% of teh credit is taken wehreas in some states it is taken by dividing the VAT by 36 and claiming it in 36 isntallments.

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Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 11 September 2012

Dear ramesh

Purchase value of capital good =1000 VAT = 50 (5%)

goods sold by your business = 2000 VAT on sales = 250(12.5)

So,

since you have purchased a capital good you will not be eligible for full set off and there will be some retention on the same since it is not a good for you ....

the retention rates differs by state by state to state......

IN MVAT ITC = 50 (-) retention @ 3% on 1000 = 50 -30 = 20

so balance payable = 250 - 20 = 230

Ok...