Fixed assets are the assets or things purchased for a long-term purpose. In GST law, the term ‘Capital Goods’ is used for such fixed assets. As per section 2(19) of CGST Act, Capital goods mean 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.
This article covers following relevant points related to GST Applicability & Treatment of ITC availed on sale of Fixed Assets:- GST Applicability on Sale of Capital Goods purchased in Pre GST era, Treatment on Sale of Capital Goods purchased after implementation of GST, Liability on sale of Capital Assets on which Input Tax Credit (ITC) is not availed, How to deal with loss/damage of assets where no consideration is received? and Tax treatment on sale/disposal of capital goods in case when ITC is availed.
Chart on Applicability of GST on sale of Fixed Assets under different condition
| Sl | Assets purchased in Pre GST / Post GST Era | ITC availed / Not availed at the time of purchase | Assets disposed of intentionally/ Unintentionally (Refer Note 1)
|
Consideration received / not received on sale of Asset | GST Applicable / Not Applicable |
| (a) | Pre GST | Not Availed | Unintentionally | No | Not Applicable |
| (b) | Post GST | Not Availed | Unintentionally | No | Not Applicable |
| (c) | Post GST | Not Availed | Intentionally | No (Refer Note 2) | Not Applicable |
| (d) | Post GST | Availed | Unintentionally | No | Applicable (Refer Note 3) |
| (e) | Pre GST | Availed | Unintentionally | No | Applicable (Refer Note 3) |
| (f) | Post GST | Availed | Unintentionally | No | Applicable (Refer Note 3) |
| (g) | Post GST | Availed | Intentionally | Yes | Applicable |
Note 1:- Unintentional disposal means loss or damage of assets due to reasons such as accident, fire, natural calamity, theft etc, whereas sale or transfer of assets are considered as intentional disposal of Fixed Assets
Note 2:- The case where no consideration is involved must be discussed in the light of the amendment to the definition of Supply (Section 7 of the Act) made by the CGST Amendment Act, 2018. Before the amendment, if any transfer of capital assets was made under the direction of the person,(intentional transfer) the transaction was a supply under the provision of the Act, whether or not consideration was involved.
However, after the amendment, the requirement of consideration is a must. Therefore, it would be right to conclude that where no ITC has been availed, the transfer of capital goods without consideration shall not be a supply and hence no GST should be chargeable.
Note 3 In case of unintentional disposal such as Damage/Lost Assets, Theft, ITC availed need to be reversed and will have to be paid as output tax liability.
Valuation & determination of Tax payable:- As per sec 18(6) of CGST Act, the taxable amount will be:- an amount equal to Input tax credit attributable to remaining useful life OR the tax on the transaction value of such capital goods determined under section 15, whichever is higher
Example
Mr. X purchased Fixed Asset on 1st June 2015 (Pre GST), Even if he purchased the same Asset in Post GST Era, the methodology to calculate the taxable amount will remain the same.
| (a) Purchase value | Rs 50000/- |
| (b) Taxes Paid (VAT/ GST) | Rs. 9000/- |
| (c) ITC availed | Rs 9000/- |
| (d) Date of Goods Sold | 1st Jan 2020 |
| (e) Date of Goods Sold | 1st Jan 2020 |
| (f) Goods used for | 55 months |
| (g) Remaining useful life | 5 months (As per CGST Rule 44(6), useful life of the asset will be taken as 5 years to calculate ITC reversal on fixed Assets) |
| (h) Sale consideration | Rs. 4000 |
| (i) GST @ 18% on Sale | Rs. 720 |
Calculation of taxable amount:-
Input tax credit attributable to the remaining useful life:-
(c*f/ 60) = 9000*5/60 = Rs 750
OR
Tax on the transaction value of such Fixed Asset
4000*18% = Rs 720/-
Rs 750/- being higher of the two will be added as taxable value.
Invoicing and reporting in GSTR 1 when ITC attributable to remaining useful life is higher:-
ITC availed for remaining useful life of Fixed Assets amounting to Rs 750 /- need to be added as tax liability and reported in GSTR 1. However taxable value to be reported in invoice and GSTR 1 will be Rs. 4167. (750/18%=4167)
Invoice No……… Dt……..
| Taxable Value (Outward Taxable supply) | Rs 4167.00 |
| GST @ 18% on Rs 4167 | Rs. 750.00 |
Invoicing and reporting in GSTR 1 when Tax on transaction value is higher
In such cases tax invoice has to be prepared and actual consideration will be the taxable value. Same has to be reported in GSTR 1. In the example given above, if sale value is Rs 5000/- and tax on transaction value is (5000*18%=900) higher than ITC attributable to remaining useful life ie Rs 750/-, Invoice will be prepared for (5000+900) 5900 /- and same is to be reported in GSTR 1
Outward Liability in case of Damage /Loss of those assets for which ITC has been availed
In case of unintentional transactions, such as Damage/Lost Assets, Theft, etc. tax on transactional value cannot be determined as there will not be any transaction value of damaged, lost capital goods Therefore amount towards ITC attributable on remaining useful life ie Rs 750 /- will have to be added as output tax liability.
The amount shall be determined separately for an input tax credit of central tax, State tax, Union territory tax, and integrated tax
Margin Scheme for valuation of capital goods
the margin scheme is applicable for a dealer other than a person dealing in second-hand goods, only in the case of motor vehicles, that too only if input tax credit has not been claimed.
The scheme is made applicable to all taxpayers on the sale of the motor vehicle held as a capital asset. Vide Notification No. 8/2018 – Central Tax (Rate) dated 25 Jan 2018. In this regard, GST has to be paid on the excess of selling price over the written down value as per the Income Tax Act, 1961, where depreciation has been claimed by the taxpayer. Where no depreciation has been claimed, GST shall be paid on the difference in the selling price and the purchase price.
The author can be accessed at caanitabhadra@gmail.com
(Republished with Amendments)
Author Bio
What if the taxable person is in business of running restaurant and has not claimed ITC on purchase of FA. Is he still liable to pay GST on sale of FA ? If yes at what % and on which amount ?
If assets is acquired Pre GST and input was availed and is intentionaly displosed post GST then how it should be dealt with
Sir let e give advice that’ Ihave sale a car with Rs.128000/excess margin of Written down value.How much GST will be paid
If Building belongs to a Charitable Trust, Registered under Sec. 12AA of Income Tax Act, 1961 has been demolished and the building scrap sold for Rs.19L and the old / used Fixed Assets (ITC not availed) like, Air conditioners, water heaters, electrical fittings and furniture & fixtures have been sold for about Rs.4L. What is the Tax (GST/TCS) liability on sale of building scrap and used Fixed Assets?
best regards,
Thenappan
If assets is acquired Pre GST and input was availed and is intentionaly displosed post GST then how it should be dealt with
Dear Madam
Due to closure of Business due to loss GST dept cancelled our GST no. due to non filling of Returns. We have the fixed assets of Pre-GST period on which we have not taken any input credit under Service tax/Vat..Presently we want to sale these fixed assets. Kindly suggest Whether we are liable to pay GST. if the entire value is Less than Rs. 40 Lacs. and If we sold it more than Rs. 40 Lacs.. We also want to sold old spare parts on which we have taken ITC of gst. spare value is Rs. 30 Lacs.
Madam if an Indian Company sells its assets to a foreign company who neither has any PAN nor has any office in India, who should bear the GST on the sale invoice. Should the Indian company pay the tax
Hi,
How to report tax calculated through margin scheme in GST return.
Is Credit available to the GST paid on sale of Motor vehicle purchased pre-GST.
Whether sale of FA will attract gst ?
As per the chart mentioned above it doesnt attract gst
can i get the reference of law (Section No. or Notification no.)
There is head office who receives services for audit,consultancy services etc.HO transfers all ITC on the above services through cross charge. Is it proper route to transfer ITC through cross charge mechanism.
When to take registration for ISD?
Merely transfer of book entry for fixed asset from HO to branch office located in different states liable to GST or not?
If Pvt Ltd is selling FA like refrigerators,coffee machines for 8 Lakh and purchases were made in 2016 & Itc has not Availed.
Is GST applicable?
Can depreciated value be taken as transaction value is n case of supply of old laptops to employees
Is we have to reverse the itc on fixed assets if it used more than their useful life
No need to reverse the ITC which u already have claimed but now u have to pay the gst on consideration which u received against the sale of fixed asset @18%
Thanks for your Reponse Mam.
I would like to clarify one more thing. If someone is dealing in Service Industry n lets suppose
Purchase price of the asset is RS 100
GST charged is RS @ 5% RS 5
n ITC reversal is let suppose Rs 80
Now while reversing itc then Taxable value would be ITC reversed divided by 18% or ITC reversed divided by 5%?
In case Capital Goods is disposed off as scrap and the Transaction value is nil, the itc reversal which is added in output tax liability how it is to be reported in gstr1? Whether the Taxable value of asset( amount of itc reversal divided by itc reversal amt and multiplied by 100) plus itc reversal or only itc reversal is to be reported in gstr1?.
I case disposal of Capital goods where ITC is availed has been disposed off as scrap and there is no transaction value ie Nil. So if ITC is reversed as per sec 18(6), Then how such reversal is to be reported in GSTR1 whether taxable value of asset according to gst reversed plus gst which is added to output liab or only gst amt?
I purchased chemical plant in 1994-95 which now has become scrap and needs to be disposed off. Will it attract any GST?? @ what rate??
Well explained
Hi everyone,
As export of goods is zero-rated, will i need to reverse ITC (Sec 18(6)) on fixed asset if it is to be exported / discarded to foreign buyer under LUT.
ITC on original asset had been taken in GST regime.
Thanks in advance.
if Capital goods are purchased after GST
ITC is not taken on above
Sale is made and consideration is received
In this case am I required to levy GST?
As per your table of different situation.
gst is applicable when credit taken
gst is not applicable when credit not taken.
in this table you have not taken a situation where asset purchased pre gst, credit not taken, and intentional sale in post gst.
clarify it.
Respected Maam,
If the person to whom sales is being made is registered person, then how to Report in GSTR 1 the Reversal amount, does we need to issue Tax Invoice to the buyer or we need to issue normal invoice? Or Only reversal in 3B is required and nothing to be reported in GSTR 1, Kindly advise, Contact No: 8101987237
Hi Madam,
whether Gst is payable, if sale of fixed assets where consideration is taken and ITC is not availed?
HI Mam,
What entry should we book in accounting as in GSTR1 it will always show extra sale amount as per your example in actual sale is Rs. 4000 and in GSTR1 it need to show as Rs. 4167 and tax amount is also going to vary.
I HOW PURCHASE OLD LORRIES 25 NOS MODEL 2014 SELLER PURCHASE IN WITHOUT GST. HOW DO OUR SALES BILL
Dear Maam,
As per your article, CGST Amendment act 2018, consideration is must for charging GST. But as per my view, there is no such amendments in law. As per Schedule 1, Permanent transfer, disposal of fixed asset made without consideration will be considered as supply and leviable to GST.
Please clear the issue, i shall be thankful to you.
Regards
Sunny Khanna
casunnykhanna@yahoo.com
Hi,
Your post is very good.
can you explain the meaning of below line writing as ” will be added as taxable value ” :-
Rs 750/- being higher of the two will be added as taxable value.
If-
Useful life of the FA exceeds 5Years, in such case how to calculate taxable value