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SIR,

ASSESSES IS PROPRIETOR AND DEALS IN AGRO PRODUCT [ INCLUDES TAXABLE AND NIL RATED SUPPLY AND PURCHASE] ALSO HAVE RENT INCOME [ TAXABLE SERVICE]

IF HE PURCHASES AC FOR HIS OFFICE, AND TAKE BILL ON HIS PROPRIETARY FIRM NAME THEN IS HE ELIGIBLE TO CLAIM ITC ON AC PURCHASE.??

Reply

Dear Sir,

As per sub rule (1) of  Rule 43 of CGST rules 2017, 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 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:-  

Firstly the taxpayer is allowed to take full credit in respect of purchase of capital goods in the relevant month, and after that the amount ITC attributable to exempted supplies shall, during every tax period of the useful life of the concerned capital goods, be added to the output tax liability of such taxpayer. 

Value of ineligible 

credit or credit attributable     =   (EĆ· F) x Tr 

to exempted supply


                                              5,00,000 x 1000

                                                        10,00,000

 

                                           = Rs. 500   (ITC of Rs. 500 has to be reversed

                                                             monthly until completion of five years

                                                             from the date of purchase of capital

                                                              goods)

1.       Suppose amount of ITC received on purchase of AC or any capital goods is Rs. 60,000

2.      "Tr"ā€” Rs. 1000 [60,000/60 (12 x 5)] Useful life of such goods shall be taken as five years  

3.      "E"ā€”aggregate value of exempt supplies made during the tax period is Rs. 5,00,000 

4.      "F"ā€”total turnover of the registered person during the tax period is Rs. 10,00,000

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