Goods and Services Tax – GST – By: – CA Akash Phophalia – Dated:- 17-6-2017 – Input tax credit on capital goods to registered persons The input tax credit on capital goods is presently available under all the laws with some restrictions. VAT law generally provides full credit on purchase of capital goods, but in some states the said credit is available in installments also. The Excise law generally provides for availment of Cenvat credit on capital goods at 50% in the first financial year in which capital goods is procured and balance 50% in the subsequent financial year. Further, the meaning of capital goods is very specific. The present chapter deals with the carry forward of Cenvat credit on capital goods for the registered persons from present tax regime into GST regime. Basic Provision The provision regarding admissibility of cenvat credit on capital goods is stated in section 140(2) of CGST Act 2017 is as under :- Section 140 (2) A registered person, other than a person opting t
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er this provision This provision is applicable on the persons registered under the present tax regime under the indirect taxes to be subsumed. Thus the following persons are covered under this provision:- (a) A person registered under Central Excise Act,1944 other than a person registered as first stage dealer or second stage dealer or as a registered importer or as a depot of a manufacturer under the said act. (b) A person registered under Finance Act 1994 (Service tax). (c) A person registered under respective Sales Tax Act. (d) A person registered under any of the relevant act as applicable to it. Thus it can be fairly inferred that the persons registered under the present indirect taxes which is going to be subsumed in the new GST regime and were eligible to avail of input tax credit on capital goods under the present taxation regime shall be eligible to carry forward input tax credit under this provision. However, if the existing registered person migrates to the GST regime and op
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be unavailed Cenvat credit in respect of capital goods and such credit on capital goods is not carried forward in the return furnished under the existing law. (b) The said credit should be admissible as input tax credit under the existing law. (c) The said credit should be admissible as input tax credit under the GST regime. Examples- (1) Sweet Memories Ltd has purchased a capital goods on April 12 2017 and paid duty of ₹ 15 lacs. It is eligible to avail of Cenvat credit on the said capital goods to the extent of ₹ 7.5 lacs in the same financial year under the present law. It can claim Cenvat credit in the return field for the relevant period in which capital goods are received presuming it to be for the month of April 2017. Now on the appointed day, say 1st July 2017, it migrated into GST regime, then the unavailed Cenvat credit to the extent of ₹ 7.5 lacs can be claimed by it under the provision of this section. (2) Sweet Memories Ltd is engaged in manufacture of ex
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