2018 (10) TMI 513 - AAR - GST

Input tax credit - migration to GST regime - transitional provisions - Whether computers, laptops etc. used by the applicant for providing output service would qualify as inputs for the purpose of availing transitional ITC under Section 140(3) of KSGST Act? - If the goods are physically available as closing stock as on 30th June, 2017, can the applicant avail ITC for the VAT paid? Held that - The applicant being a service provider had no tax liability under VAT regime. As per the proviso to Sub-Section (2) of Section 140 of the GST Act, a registered person shall not be allowed to take credit unless such credit was admissible as input tax credit under the existing law and is also admissible as input tax credit under GST Act - As per Section 2(59) of GST Act, input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. The computers, laptops etc. were used by the applicant for providing output service are capital assets. These capital goods are ineligible to claim input tax credit under VAT Laws - The applicant being a service provider, is not eligible to avail input tax credit on computers and laptops held during transition period. The proviso to Sub-Section (2) of Section 140 of the GST Act, is specific to the point that input tax credit not admissible as under the existing law is ineligible to claim input tax credit under GST Act. Section 140(2) of the Act covers transitional credit claim on capital goods by a dealer registered in earlier law. Ruling - The computers, laptops etc. used by the applicant for providing output service would not qualify as inputs for the purpose of availing transitional ITC under Section 140(2) /140(3) of the KSGST Act. The goods, even though physically available as closing stock as on 30th June 2017, ITC is not eligible for the VAT paid.

Summary

Issues:
1. Whether computers, laptops used for providing output service qualify as inputs for availing transitional ITC under Section 140(3) of KSGST Act?
2. Can the applicant avail ITC for VAT paid on goods physically available as closing stock on 30th June 2017?

Analysis:

Issue 1:
The applicant sought an advance ruling on whether computers, laptops used for providing output services qualify as inputs for availing transitional Input Tax Credit (ITC) under Section 140(3) of the KSGST Act. The authorized representative argued that as per Section 140(3) of the GST Act, a registered person can claim credit of Value Added Tax (VAT) on inputs held in stock for making taxable supplies under the GST Act. However, the applicant, being a service provider with no tax liability under the VAT regime, was ineligible to claim ITC on capital goods like computers and laptops, as they are considered capital assets under the GST Act.

Issue 2:
The second issue revolved around whether the applicant could avail ITC for VAT paid on goods physically available as closing stock on 30th June 2017. The ruling clarified that the applicant, as a service provider, was not entitled to claim input tax credit on computers and laptops held during the transition period. The proviso to Section 140(2) of the GST Act specifies that ITC not admissible under the existing law cannot be claimed under the GST Act. Therefore, the transitional credit claim of the applicant in respect of capital goods was deemed ineligible.

In conclusion, the ruling stated that the computers, laptops used for providing output services did not qualify as inputs for availing transitional ITC under the KSGST Act. Additionally, even though the goods were physically available as closing stock on 30th June 2017, ITC for the VAT paid on them was not eligible for the applicant. The decision was based on the specific provisions of the GST Act regarding transitional credit claims and the eligibility criteria for input tax credit under the existing law.