Supply of Input Tax Credit paid Capital Goods : ICAI Suggestions

Suggestions on GST Implementation Issues 28.09.2017 by ICAI

41. Supply of Input Tax Credit paid Capital Goods

Section 18(6) of CGST Act provides that in case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher:
Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15.

Issue

The provision deals with reversal of input tax credit in case of removal of capital goods but
the current wordings “In case of supply of capital goods or plant and machinery” have a
far-reaching impact. First it uses the term supply which includes even renting of that capital
goods i.e. to say in case the capital goods are rented out, Sec 18(6) triggers and there would
be reversal of ITC which is not the intention and secondly the use of word plant and
machinery is not required as they are already covered under the meaning of capital goods.
It will help give the provision intended scope and not hit those transactions which are not
intended.

Suggestion
It is suggested that the in place of words “in case of supply of capital goods or plant and
machinery” the words “In case of supply of capital goods, on which input tax credit….” be
used.

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

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