Time Limit of 1 year for taking Input Tax Credit for Capital Goods : ICAI Suggestions

By | October 9, 2017
(Last Updated On: October 9, 2017)

Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

Law Related Issues

40. Time Limit of 1 year for taking Input Tax Credit for Capital Goods

Section 18(1) of CGST Act, 2017 provides that subject to such conditions and restrictions as may be prescribed—

(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act;

(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration;

(c) where any registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section 9:

Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed;

(d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable:

Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed

Further, Section 18(2) of CGST Act, 2017 provides that registered person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.

Issue
The provision seems beneficial but restricting the period of one year for availing Input Tax Credit on Capital Goods is very less. For a dealer purchase of Capital Goods is a rare activity where a huge investment is involved. The dealer will transit to GST with such high tax paid capital goods and is expected to use them for further supply in GST regime.

Further, as per clause (c) and (d) of Section 18(1) a percentage point method shall be prescribed for taking input tax credit in case of capital goods. Thus, there seems a gap between the provisions of section 18(1) and Sec 18(2) since percentage point method is used for a longer period.

Suggestion
It is suggested that period of 1 year for availing input tax credit be restricted only to inputs and in case of capital goods a longer period be prescribed.

 

Read Suggestions on GST Implementation Issues 28.09.2017 by ICAI Indirect Tax Committee

Related Topic on GST 

TopicClick Link
GST Acts Central GST Act and States GST Acts
GST RulesGST Rules
 GST FormsGST Forms
GST RatesGST Rates
GST NotificationsGST Act Notifications
GST CircularsGST Circulars
 GST JudgmentsGST Judgments
GST Press ReleaseGST Press Release
GST BooksBest Books on GST in India
GST CommentaryTopic wise Commentary on GST Act of India
GST You Tube ChannelTaxHeal You Tube Channel
GST Online CourseJoin GST online Course
GST HistoryGST History and Background Material

Leave a Reply

Your email address will not be published. Required fields are marked *