GST Provisions for Fixed Assets
Section 2 (52)
“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
Section 2 (59)
“input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business;
Section 2 (19)
“capital goods” means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business;
The definition of capital goods under GST is based on accounting concept rather than any specific definitions given in the act.
Further the use of capital goods shall be for furtherance or in the course of business which again is an improvement over previous laws which mandated nexus with final output or service.
ITC on Capital Goods
Section 16 (1)
Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
As per Section 16(1), ITC can be availed on goods and services which are used in the course of furtherance of business. Since the words ‘goods’ have been used, it implies that goods includes ‘capital goods’ and ‘inputs’. The ITC is available in one go unlike Cenvat Credit which was allowed over two financial years.
Credit is also allowed on Capital Goods which are sent directly to the Job Worker for use in Job work processes.
ITC on Capital Goods – Cases of dis-allowance
ITC on Capital Goods shall not be allowed in following cases:
ITC Reversal on Disposal of Capital Goods
Sale of Fixed Assets
As per Section 18(6) read with Rule 40(2) and Rule 44(1)(b), in case of Supply of Capital Goods on which ITC was availed, an amount higher of the following shall be payable:
Write of Fixed Assets
As per Schedule I, Permanent transfer or disposal of business assets where input tax credit has been availed on such assets will be treated as supply.
Since write off is also a supply, the tax payable shall be equal to the ITC on remaining life as per Section 18(6) as transaction amount is Nil.
Sale of Old/Used Vehicles
In case of sale of old/used vehicles, where depreciation has been claimed under Income Tax Act, the value of supply shall be :
Where the margin of such supply is negative, it shall be ignored
In any other case, the value that represents the margin of supplier shall be, the difference between the selling price and the purchase price and where such margin is negative, it shall be ignored.