QUESTION
We have an old ambulance
which has been capitalised as business assets of the company and on which Cenvat
credit has already been availed. This ambulance is now being given free of cost
to a private hospital. Kindly clarify following points: a. Whether this
transaction will be covered under CSR activity of the company; b. Whether this
transaction will constitute as `supply` and if so, what will be the GST rate? (GST
rate at the time of availing ITC was 28% but today it has been reduced to 18%.).
Requesting your valued opinion please.
ANSWER
Facts of the case: An old
ambulance which was capitalised as business assets of the company and on which
Cenvat credit has already been availed. This ambulance is now being given free
of cost to a private hospital. a. Whether this transaction will be covered under
CSR activity of the company; b. Whether this transaction will constitute as
`supply` and if so, what will be the GST rate? (GST rate at the time of availing
ITC was 28% but today it has been reduced to 18%.).
Law Applicable: CGST RULE 43
(1) Subject to the
provisions of sub-section (3) of section 16, the input tax credit in respect of
capital goods, which attract the provisions of sub-sections (1) and (2) of
section 17, being partly used for the purposes of business and partly for other
purposes, or partly used for effecting taxable supplies including zero rated
supplies and partly for effecting exempt supplies, shall be attributed to the
purposes of business or for effecting taxable supplies in the following manner,
namely,-
(a) the amount of input tax in respect of capital goods used or intended to be
used exclusively for non-business purposes or used or intended to be used
exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and
FORM GSTR-3B and shall not be credited to his electronic credit ledger;
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c) the amount of input tax in respect of capital goods not covered under
clauses (a) and (b), denoted as 'A, being the amount of tax as reflected on the
invoice, shall credit directly to the electronic credit ledger and the validity
of the useful life of such goods shall extend upto five years from the date of
the invoice for such goods:
Provided that where any capital goods earlier covered under clause (a) is
subsequently covered under this clause, input tax in respect of such capital
goods denoted as 'A‟ shall be credited to the electronic credit ledger subject
to the condition that the ineligible credit attributable to the period during
which such capital goods were covered by clause (a),denoted as 'Tie‟, shall be
calculated at the rate of five percentage points for every quarter or part
thereof and added to the output tax liability of the tax period in which such
credit is claimed:
Provided further that the amount 'Tie‟ shall be computed
separately for input tax credit of central tax, State tax, Union territory tax
and integrated tax and declared in FORM GSTR-3B.
Reply: As per the additional information provided telephonically, the
ambulance is supplied to non-related party free of cost.
Since it is supplied to non-related party free of cost it will not attract Rule
28 i.e "Value of supply of goods or services or both between distinct or related
persons, other than through an agent."
It is put into use for exempt supply after being used for taxable supply up to a
particular date, so Rule 43 (c) will apply
You have to reverse credit at the rate of 5% per quarter for the remaining life
of the ambulance
The life of the capital goods is five years (60 quarters)
Suppose credit taken is Rs 1,00,000/-, ambulance is sold after 4 years then ITC
required to be reversed is (100000/60)*12= 20,000/- Twenty thousands
(Reply dt. 05/07/2021)