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CA Intermediate · Taxation · Input Tax Credit

Kaveri Textiles, a registered person in Surat, purchased a laptop for Rs 80,000 plus GST of Rs 14,400 (18%) and uses it 100% for taxable outward supplies. It capitalised the laptop in its books and claimed depreciation on the full cost including GST under the Income-tax Act. What is the ITC Kaveri Textiles can claim on the laptop, assuming other conditions are satisfied?

The ITC is nil. When a taxpayer claims depreciation on the tax component of the cost of a capital asset under income-tax law, ITC on that tax component cannot be claimed. Since the laptop cost including GST was depreciated, the Rs 14,400 GST is ineligible.

  1. ARs 14,400
  2. BRs 7,200
  3. CNil, because the tax component was capitalised and depreciation claimed on itCorrect
  4. DRs 14,400 spread equally over five years

Explanation

Under the CGST Act, ITC is not available on the tax component of an asset if depreciation is claimed on that tax component under the income-tax law. Kaveri claimed depreciation on the cost including GST of Rs 14,400, so ITC of that amount is barred. Rs 14,400 is wrong because it ignores this restriction.

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