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Issues: Whether the petitioner was entitled to transitional credit under Section 140(3) of the Kerala State Goods and Services Tax Act, 2017 in respect of computers and laptops used for rendering services, and whether those items were excluded as capital goods for the purposes of Chapter XX.
Analysis: The claim was specifically under Section 140(3), not Section 140(2). Under Section 140(3), a registered person who was not liable to register under the existing law is entitled to take credit of VAT or entry tax on inputs held in stock on the appointed day, subject to the stated conditions. Although Section 2(59) of the Kerala State Goods and Services Tax Act, 2017 excludes capital goods from the definition of input, Chapter XX contains an Explanation that gives the expression "capital goods" the same meaning as in the Kerala Value Added Tax Act, 2003. Under Section 2(x) of the Kerala Value Added Tax Act, 2003, goods used for rendering services are excluded from capital goods. Since the computers and laptops were used by the petitioner for rendering services, they did not fall within capital goods for Chapter XX purposes, and the reliance on Section 140(2) was misplaced.
Conclusion: The petitioner was entitled to transitional credit under Section 140(3) in respect of the computers and laptops.
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