Changes in the definition of inputs,input services and capital goods

[Pradeep Jain]

GST DAILY DOSE OF UPDATION

Changes in definition of inputs, capital goods and input services

As evident from revised draft, the definitions of the input goods, capital goods and input services have undergone a major change or let’s say, it has been simplified to the maximum extent possible. In the current laws, there are definitions containing specifications and restrictions to items and services on which cenvat can be taken or not. But in the new regime, these restrictions have been minimised. For eg. the definition of input is given in sec 2(52) as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.

The definition of input service has been given in sec 2(53) as any service used or intended to be used by a supplier in the course or furtherance of business.

The definition of capital goods has been given in 2(19) as to means goods, the value of which is capitalized in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business.

Although this being a welcome step, it should also be looked into that what new issues can crop up due to this change? Earlier parts, accessories and components of capital goods were also classified as capital goods but now the consumables can’t be treated as capital goods as they won’t be capitalized. It is most probable that they will fall as residuary items in the definition of inputs.

Similarly it has been stated that goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even when used in course or furtherance of business won’t be eligible for availing cenvat. But if the building is being capitalized then the inputs used in the building will be treated as capital goods and its cenvat should be allowed.

Discussions to this article

[Sanketh Meri]

Dear Sir,

In your Last Para, it has been mentioned that if the Immovable Property is capitalized, then its inputs should be allowed for ITC. Can you throw some more light on this.

[Narhar Nimkar]

Dear Sir,

I am doubtful about the availability of credit on steel, cement used in construction of building as stated in the article. Clause (d) of Sub-section (5) of Section 17 clearly states that - "Goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business" shall be denied.