Skip to content

CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

Under section 16 of the CGST Act, 2017, a registered person has claimed depreciation under the Income-tax Act, 1961 on the tax component of the cost of a plant and machinery item. What is the position of input tax credit on that tax component?

Input tax credit on the tax component is not allowed. Section 16(3) bars credit where the registered person has claimed income-tax depreciation on the tax component of capital goods or plant and machinery, so the person must choose one benefit and cannot take both.

  1. ACredit is allowed in full and depreciation is reduced
  2. BCredit is allowed at 50% of the tax component
  3. CCredit is allowed only if the machinery is used for exempt supplies
  4. DCredit on that tax component is not allowedCorrect

Explanation

Section 16(3) provides that where depreciation has been claimed on the tax component of the cost of capital goods and plant and machinery, input tax credit on that tax component shall not be allowed. No partial or alternative treatment is provided, so the other options are wrong.

Did you get it right without looking?

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

Practise Input Tax Credit and Computation of GST LiabilityFree diagnostic mock

More Input Tax Credit and Computation of GST Liability questions