Capital Goods definition under GST : Issues and Suggestions

Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India

2. Definition of Capital Goods

Section 2(19) of CGST Law provides that “capital goods” means goods, the value of which is capitalised 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;

Issue

Under this definition, no treatment for the items have been provided which will be expensed during the year of purchase but not written off in the books due to their nature and use in industry.

Suggestion

 It is suggested that an exception be provided for items which are written off during the year of purchase in books of accounts to treat them as capital goods even if not capitalised in books of accounts.

 Further, it is suggested that this definition may also include the goods, the value of which is amortized over a period in the books of accounts.

 Additionally, the term “in the course or furtherance of business” be replaced with “for the purpose of business” so that no scope for restriction of credit is left. Same change may also be done for definitions of “Input” & “Input Services”, “Outward Supply” and also in Schedule I & II.

 The term “value” be replaced with the words ‘purchase consideration’ for better clarity.

Read ICAI Suggestions on GST Act to Govt : July 2017

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