CA Saurabh Chokhra

ca-saurabh-chokra1. Definition of capital goods simplified:

  • Simple definition of capital goods has been given in the revised draft which states that “capital goods” means goods, the value of which is capitalized 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.
  • No concept of chapter ID neither requirement of use in factory unlike in Cenvat credit rules.
  • It will reduce litigation as accounting treatment will decide whether goods will be capital or otherwise.

2. Determination of Time of supply of service made logical:

  • Time of Supply of service (Point of taxation ) shall be the earlier of invoice date or date of receipt of payment , however , if invoice not raised within prescribed period (not decided yet) , time of supply shall be the last day by which invoice was required to be issued .
  • In service tax law , when assessee fails to raise invoice within prescribed time , point of taxation shifts back to date of completion of service ( which generally complete before the prescribed period to issue invoice )
  • But as per revised draft, even if invoice not raised in prescribed time atleast point of taxation won’t shift to date of completion of service rather it would be last date on which invoice to be issued.
  • Same provision to apply for determination of time of supply of goods.

3. Reverse charge on services – Overdue basis liability period curtailed:

  • Time of Supply of service in case of reverse charge shall be  the earlier of : i) the date on which the payment is made, or b) the date immediately following 60 days from the date of issue of invoice by the supplier:
  • In ST law overdue for more than 90 days payable under reverse charge, but as per revised draft overdue for more than 60 days will trigger liability to pay tax under reverse charge.

4. No concept of on-hold Cenvat in case of capital goods except for telecos:

  • As per revised draft law , Cenvat on capital goods can be claimed in the first year itself i.e as soon as capital goods received. However, only exception is in case of telecom companies for telecom towers.
  • Hon’ble Bombay HC denied Cenvat credit in respect of structure supporting telecom tower in case of Bharti Airtel. However , as per revised draft law input tax credit in respect of telecommunication tower fixed to earth by foundation or structural support including foundation and structural support can be taken over a period of 3 years.

5. Insurance on motor vehicles now eligible input service:

  • In cenvat scheme , ST paid on insurance is allowable only if the goods under certain chapter heading 8711 etc . , however , as per revised draft all services used in the course of furtherance of business are input service on which tax credit can be claimed unless the credit restrictions specifically provided.
  • Insurance service not included in restricted credit provisions.

6. Credit transfer facility to centralized registered assesses:

  • Assessee having centralized registration may transfer balance of Cenvat credit on appointed date (effective day of gst act implementation) to any of the registered taxable persons having the same PAN for which the centralized registration was obtained under the earlier law.

For Example: GST effective date: 1st Apr ,2017. Wipro Limited having centralized registration in Bangalore of its units operating in Bangalore, Mumbai , Noida and Hyderabad having balance of 1 crores, 2crores , 3 crores and 4 crores respectively. Wipro can now transfer 10 crores to any of unit/units as Opening CGST because in GST scenario state wise registration to be taken where even CGST will be state wise pool.

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Input Credit Scheme Under GST

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March 2024