ITC reversal on fixed assets written off in the books, Goods and Services Tax - GST

[Ramesh Pokar]

A private limited company has written off the residual value of computers in its books of accounts at the end of their useful life of 3 years, as per Schedule II of the Companies Act.

Is ITC reversal required? If yes, should it be done under Rule 40(2) or as per Schedule I of the CGST Act?

Is it not an anomaly in the law that the Companies Act provides a useful life of 3 years for computers, whereas the GST law provides 5 years?

Request valuable inputs from the experts. Thank you

Posts / Replies

[Sadanand Bulbule]

Dear Sir

ITC needs to be reversed in terns of Section 17[5][h] of the CGST Act, which speaks about "write-off" segment as per the procedure prescribed.

[Sadanand Bulbule]

Please read it as:

" Written off" segment

[Ramesh Pokar]

Thank you sir for your reply, but sir section 17(5)(h) talks about goods written off, in the query capital goods have been written at the end of useful life of the assets. 

[Sadanand Bulbule]

Dear Sir

 Broadly speaking for the purpose of Section 17[5][h], the concept of 'goods' also includes "capital goods".

[KASTURI SETHI]

Sh.Ramesh Pokar Ji,

Q. No.1 : Is ITC reversal required? If yes, should it be done under Rule 40(2) or as per Schedule I of the CGST Act ?

Reply : Reversal is required under Rule 40 (2) of CGST Rules. It is covered under the definition of 'Capital Goods'. .See Section 2 (19) of CGST Act.

Q.No.2 : Is it not an anomaly in the law that the Companies Act provides a useful life of 3 years for computers, whereas the GST law provides 5 years ?

Reply : No anomaly. Both Acts are independent of each other. Both Acts have different specific purposes and statutory responsibilities to be complied with accordingly.

I also concur with all the replies of an expert, namely, Sh.Sadanand Bulbule, Sir