EXAMPLE-131

What is the implication of goods and service tax on sale of old Capital goods on 22^nd August, 2019 on which company has already availed input credit on purchase of the same? Capital goods were purchased on 13^th august 2017

  Price at the time of purchase - Rs. 50 Lacs

Credit availed of integrated tax paid on purchase - Rs. 5.00 Lacs.

New proposed sales price - Rs. 28 Lacs and IGST rate @12%

Is the Cenvat credit availed earlier required. to reversed?

Answer

Section 18(6) with ITC Rules, where supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered taxable person shall pay an amount equal to:-

  (a)                 the ITC taken on the said capital goods or plant and machinery reduced by the percentage points points per quarter or part thereof (i.e. 5%  as may be specified in this behalf) OR

(b)               the tax on the transaction value of such capital goods or plant and machinery under sub-section (1) of section 15, whichever is higher

In view of above provision higher of below calculated tax amounts will be reversed in respect of above example

(a)                Capital goods used in Quarters = 10 quarter (quarter or a part of quarter)

ITC  taken i.e. Rs 5 lakh - (5% *10) = Rs. 2.50 lakh

(b)               28 lakh @ 12% = Rs. 3.36 lakh

Amount to be reversed =Rs. 3.36 Lakh