Skip to content

CA Intermediate · Taxation · Input Tax Credit

Sharma Traders, a registered dealer in Indore, purchased a laptop for Rs 80,000 plus GST of Rs 14,400 (18%). The laptop is used 100% for taxable supplies and is capitalised in the books. Sharma Traders does not claim depreciation on the GST component under the Income-tax Act. What is the ITC available on the laptop?

The full Rs 14,400 is available as ITC. Capital goods used wholly for taxable supplies qualify for immediate credit, provided depreciation is not claimed on the GST component. There is no blocking or phased credit for such goods.

  1. ARs 14,400, because the tax component is not claimed as depreciationCorrect
  2. BNil, because capital goods are blocked
  3. CRs 7,200, being 50% in the year of purchase
  4. DRs 14,400 spread equally over five years

Explanation

ITC on capital goods used for taxable supplies is allowed in full in the month of receipt. The condition is that depreciation is not claimed on the tax component. Capital goods are not blocked, and there is no staggered or 50% credit rule.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax CreditFree diagnostic mock

More Input Tax Credit questions