Input Tax Credit on Capital Goods in transit, Goods and Services Tax - GST

[S R AGRAWAL]

Dear Experts,

I have to submit if the Input Tax Credit will be admissible in case Capital Goods as defined under Rule 2(a) of the CENVAT Credit Rules, 2004 cleared prior to 01.07.2017 and received in the factory of manufacturer after 01.07.2017?

Section 140 of CGST Act, 2017 contains the transitional provisions and Sub-section (5) relating to Inputs and Input Services, but no such provisions are found in respect of Capital Goods.

Kindly advise.

Thanks,

S R AGRAWAL.

Posts / Replies

[KASTURI SETHI]

There was some restriction for taking ITC on Capital goods during transition period. So the word, "Capital Goods' does not find place.

[HimansuSekhar Sha]

Capital goods credit cannot be taken.

[Ashok Chopra]

It is very unfortunate for trade and industry but yes Section 140 (5) talks only about the avialibility of credit on Inputs and Input Services and is silent on the issue of availability of credit of eligible duties and taxes paid on procurment of Capital Goods . Hence credit of tax paid on Capital Goods procured during transitional period can not be taken.

[Rajagopalan Ranganathan]

Sir,

According to Section 140 92) of CGST Act, 2017 "A registered person, other than a person opting to pay tax under section 10 (Composition Scheme), shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed:

Provided that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law and is also admissible as input tax credit under this Act.

Explanation.––For the purposes of this sub-section, the expression “unavailed CENVAT credit” means the amount that remains after subtracting the amount of CENVAT credit already availed in respect of capital goods by the taxable person under the existing law from the aggregate amount of CENVAT credit to which the said person was entitled in respect of the said capital goods under the existing law."

Further rule 117 (2) (a) of CGST Rules, 2017 stipulates that "in the case of a claim under sub-section (2) of section 140 (Availmnet of remaining credit in respect of capital goods), specify separately the following particulars in respect of every item of capital goods as on the appointed day

(i) the amount of tax or duty availed or utilized by way of input tax credit under each of the existing laws till the appointed day; and

(ii) the amount of tax or duty yet to be availed or utilized by way of input tax credit under each of the existing laws till the appointed day."

Though sub-section (5) of Section 140 of CGST Act, 2017 does not include capital goods in its ambit, in my opinion, it is an unintentional error and you may please take up the matter with the authorities concerned and the same will be remedied.

[KASTURI SETHI]

Peruse definition of Capital Goods as per Section 2 (19) of CGST Act, 2017. The goods which have been capitalised on the books of account on those goods input tax credit can be claimed and used ____________. Capitalisation is important to avail ITC. In other words, the definition of ITC includes capitalised goods also. Emphasis is supplied on capitalisation.

[Ganeshan Kalyani]

Input and input services supplied pre GST but invoice received and accounted in the books in the month of July was allowed for 30 days from the appointed date. However such provision is not given in law for capital goods. So it was advised at that time that capital goods should not be kept in transit as transition benefit is not there.

In my view if all industry request the law maker to give credit in case of capital goods then council may come out with some relief.

[HimansuSekhar Sha]

In the FAQ it is clarified. Credit is not available

[S R AGRAWAL]

Thanks all experts for their opinion. Special thanks to Mr. Rajgopalan who has explained the issue on the basis of existing provisions of CGST law.

To my considered opinion it is just an escape of attention and once the Capital Goods received on 30.06.2017 and credit to be carried forward, there can not be any logic not to allow the Credit on Capital Goods under transit. As regards capitalization, except parts or components all Capital Goods are generally capitalized and depreciation is claimed by the trade and industry.

To my opinion, the matter needs to be referred to the authorities or some one should take credit and if objected, it should pass the test of judicial review.

Thanks,

S R AGRAWAL