Manner of reversal of credit under special circumstances

Rule 9(1) of draft GST ITC Rules provides that amount of input tax credit, relating to inputs lying in stock, inputs contained in semi- finished and finished goods lying in stock, and capital goods lying in stock, for the purposes of sub-section (4) of Section 18 or sub-section (5) of Section 29, shall be determined in the following manner namely, –

(a) For inputs lying in stock, and inputs contained in semi-finished and finished goods lying in stock, the input tax credit shall be calculated proportionately on the basis of corresponding invoices on which credit had been availed by the registered taxable person on such input.

(b) For capital goods lying in stock the input tax credit involved in the remaining residual life in months shall be computed on pro-rata basis, taking the residual life as five years.

Issue

There seems to be a drafting anomaly here with the words “taking the residual life as five years”.

Suggestions

It is suggested that the words “taking the residual life as five years” be replaced with ‘….taking the useful life as 5 years…’.

Source ICAI Suggestions on GST Rules Submitted to Govt of India