Input Tax Credit on Fixed Assets under GST

The input tax credit is governed by section 17 of CGST Act, 2017 -Apportionment of credit and blocked credits, the relevant extract is as under:

(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered personpartly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Example:
CASE 1: If Fixed Assets (for brevity'FA') used only for business purpose and effecting taxable supplies, then full input tax credit can be claimed; and 

CASE 2 : If FA are used both for purposes of business and other purposes or for effecting taxable supplies and exempt supplies, then ITC shall be claimed proportionately  which would be calculated as per Rule 43 of CGST Rules, 2017.

CASE 3 : If FA are used both for purposes of business and other purposes or for effecting taxable supplies and exempt supplies and if person has claimed full amount of ITC, then ITC will be reversed proportionately which would be calculated as per Rule 43 of CGST Rules, 2017.  

Points to be noted

1. As per section 17(5) of CGST Act, 2017, the relevant extract is reproduced as under:

input tax credit shall not be available in respect of the following, namely:-

(a) motor vehicles and other conveyances except when they are used––
(i) for making the following taxable supplies, namely:-
    (A) further supply of such vehicles or conveyances ; or
    (B) transportation of passengers; or
    (C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods;

If FA are motor vehicles then company shall claim ITC on motor vehicles only if covered in the above 4 cases.

2. However, in case person avails proportionate ITC, the unclaimed ITC will be capitalized and depreciation can be claimed on the same.