Income tax on educational institutions often remains the most controversial topic. The nature o...
Input tax has been proved to be the most significant feature in the era of GST. It has changed the style of taxation charging on goods and services. Today, in this article we will tell you about the rules impended on ITC Rules. for capital goods under the GST system.
We do know you know the definition but just recall it once before heading the articled-
ITC means the Input Tax Credit. It is the backbone of the GST regime as the whole GST is lying on it. An input Tax credit means at the time of paying tax on the output you can reduce the tax which you have already paid on inputs.
For example- You paid input tax on raw material for Rs 300. After that when the product is ready for sale you paid an output tax for Rs 500. Now, at this time you can claim an Input tax credit of Rs 300 and will only oblige to pay Rs 150 in taxes.
Input Tax Credit = Output Tax on the final product – Input Tax on the raw material.
Input tax credit Mechanism is only available to you when you covered under the GST act. That means, if you are a manufacturer, supplier, agent, e-commerce operator, aggregator or any of the person that covers under GST and registered GST then you are eligible to claim ITC paid by you on your purchase.
Capital goods are assets such as building, equipment, machinery, vehicles, and tools that an organization uses to produce goods or service. Taking an example of a Blast furnace that is used in the iron and steel industry is a kind of capital asset for the steel manufacturer.
To claim an Input Tax Credit under the GST the following are the factors you need to cover-
It is also possible to carry forward or claim a refund in Input tax credit in case you have unclaimed input credit which is due because of the high tax paid on purchase or sale.
Rule 8 of the Input Tax Credit deals with the ITC in case of capital goods in GST-
Credit for tax period= ITC credited to electronic Credit Ledger / 5* 12 months
ITC=Input tax – 5% of the input tax for every quarter or part there of
Read our article:TDS and TCS Provisions are notified under GST