Skip to content

CA Intermediate · Taxation · Input Tax Credit

Sharma Traders, a registered dealer in Jaipur, purchased office furniture for use in its business on which IGST of Rs 18,000 was charged. The furniture is capitalised in its books and no depreciation claim on the GST component has been made under the Income-tax law. Sharma Traders makes only taxable supplies. What is the position regarding ITC on the furniture?

Full ITC of Rs 18,000 is available. The furniture is used in the course or furtherance of business, the dealer makes only taxable supplies, furniture is not a blocked item, and no depreciation was claimed on the tax component.

  1. AITC of Rs 18,000 is available, since the furniture is used in the course or furtherance of businessCorrect
  2. BITC is blocked because furniture is capital goods
  3. CITC of 50% only is available in the first year
  4. DITC is available only if the furniture is also resold

Explanation

Office furniture used for business is not in the blocked list under section 17(5) for a dealer making taxable supplies, and capital goods ITC is allowed. Since depreciation is not claimed on the tax component, full ITC of Rs 18,000 is available. Option 2 wrongly treats capital goods as blocked.

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