Ambiguity on availment of ITC on Capital Goods in 60 Instalments? Clarified

Query no 1. Whether Full Input Tax Credit is available on Purchase of Capital goods 

• Capital goods ( Which is being capitalized in the books of accounts) when used for the exclusively taxable supply and not covered under the exclusion category – 100% credit of the same be availed on first day of availment and also can be utilised for the payment of the GST
• Capital Goods used for exclusively exempted supply i.e. for instance when the Trucks given to GTA or Machines used in Garment manufacturers and availing the duty drawback benefit – No credit will be available
• Common Capital Goods for taxable supply i.e. ( GTA with FCM) and also exempted supply ( Trucks given to GTA ) – 100% credit of the same be availed on first day of availment and also can be utilised. However, payment of tax along with interest on the credit on capital goods to be done on monthly basis to the extent of exempted turnover to aggregate turnover of each tax period . Detailed mechanism of reversal is defined in reply to question no -2

Query no 2. Whether we have to take ITC on Capital Goods in 60 Instalments or the same can be availed upfront –

Please note that ITC on capital goods is to availed on first day rather than 60 instalments. However, please note that when the said Capital Goods purchased are used for providing both service i.e taxable and exempted, then every month the proportionate credit ( Total Credit on capital goods / 60 months) to be paid to the extent of capital goods used for rendering exempted turnover.

Let’s suppose Capital Good i.e. Truck being purchased on which Tax being paid is INR 60,000 for providing GTA service ( taxable service) under FCM to clients and also for providing the service of giving the hire of trucks to GTA ( which is exempt under the GST regime) in the month of July 2017.

For the said month, the company has taxable turnover of INR 70,000 and exempted turnover of INR 30,000.

In such scenario, credit of INR 60,000 will be available 100% in the first month i.e. July 2017 , however every month the company has to pay the credit ( INR 1000 = (Total Credit/60 month) to the extent of exempted turnover. So the credit which needs to paid is INR 300 ( only with interest) only in the month of July 2017.

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https://gstexpertise.com/2017/09/25/ambiguity-on-availment-of-itc-on-capital-goods-in-60-instalments-clarified/