What is Capital goods under GST

Meaning of term Capital goods under GST



Capital Goods:

In this article, the information about Capital goods is explained.

“Capital goods” means goods, the value of which is capitalised 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

Capital goods are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.

ITC Rules for Capital Goods under GST

One of the critical aspects of the Goods and Services Tax, or GST, is the availability of input tax credit on capital goods used for manufacturing activities. ITC Rules for Capital Goods under GST have been prescribed which is to be followed strictly.

Manufacturing contributes a major part to our country’s GDP and initiatives such as Make in India, Digital India are going to boost it further.

The GST Council has agreed upon rules related to transition, input credit, registration as well as other features of the tax. In this article, we shall give you our guide on ITC Rules for Capital Goods under GST.

ITC Rules for Capital Goods under GST

Credit of Input Tax will not be available on the following:

         i.            Capital Goods used exclusively for effecting exempt supplies

       ii.            Capital Goods used exclusively for non-business (personal) activity

Credit of Input Tax will be available in totality where Capital Goods have been used for effecting taxable supplies and business activity without any restrictions

Amount of input tax referred in above points A and B must be indicated in Form GSTR-2 and however only point B will be credited to electronic credit ledger.

Where Capital Goods is used commonly for exempt and taxable supplies and/or business and non-business activity the credit of input tax shall be calculated in the following manner:

The amount of credit to be added to output tax liability attributable to exempt supplies out of input tax for common use of capital good shall be

Remaining amount after deducting credit attributable towards exempt supplies will be allowed as ITC

All the above calculations must be done separately for:

  1. Central tax
  2. State Tax
  3. Union Territory Tax
  4. Integrated Tax

The information provided here is about Capital goods.  If you would you like to add more information about Capital goods, share below your thoughts.



P. chandrasekar: We are in the entertainment business can we take credit on buildings etc.,

Raj Sinha: I receive commission in the form of foreign exchange for marketing of foreign company. Do i need to pay GST?

Chandrahas Ballal: In GST Audit 17-18, In case of AOP,I'didn't take a Output Tax -Sales for the M/of March-18 ,nither shown in any GST Returns,earlier & not till now,& in case if I've Lumpsum of ITC Input credit Available with me in Books,Can I get Set-off (Payment thru the Input Tax Credit Available ) or will have Pay the Output GST Tax Now thru e-Payment ? Secondly,I forgot to take ITC Credit on Purchases in 2017-18,whether I'can get the ITC Now anyhow? (which was not taken in Apr-Sept-18 GST Returns either) ? Please suggest,Since the amount is heavy say >10L

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