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CMA Intermediate · Direct and Indirect Taxation · Input Tax Credit

Gupta Enterprises bought capital goods costing Rs 5,00,000 plus GST of Rs 90,000. In its income-tax computation it claimed depreciation on the full Rs 5,90,000, including the tax component. What is the position of input tax credit on the Rs 90,000 under the CGST Act?

Input tax credit on the Rs 90,000 is not allowed. Where a registered person has claimed depreciation on the tax component of the cost of capital goods, credit on that tax component is barred, so the person cannot take both benefits.

  1. AFully allowed, as capital goods are always eligible
  2. BAllowed to the extent of 50 percent
  3. CNot allowed on the tax component on which depreciation is claimedCorrect
  4. DAllowed only after 180 days from the invoice date

Explanation

Section 16(3) provides that where depreciation has been claimed on the tax component of the cost of capital goods, input tax credit on that tax component is not allowed. There is no 50 percent rule, and the 180 day proviso concerns payment to the supplier.

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