GST on sale of Plant & Machinery

[Vartik Choksi]

The company was carrying on the business of manufacturing of chemicals and the majority of ITC was accrued at the time when the manufacturing was carried on. The majority of the ITC was availed through TRANS-1 (Due to huge Plant & Machinery purchased in Excise Regime). There after there are very few instances of sales in post GST era and hence the company has closed its operations in April 2019 and already paid GST on sale of Plant & Machinery by utilizing the balance lying in Electronic Credit Ledger. However still after utilizing the ITC, huge balance is still lying in the credit ledger. (mainly attributable to CENVAT Credit avalied pre-GST). The company has not canceled its GST Registration. During FY 2019-20 the company has rendered the services for marketing the goods and service income on which GST has been charged.

a. Whether balance lying in the Electronic Credit Ledger is required to be reversed? If yes, then under which section of CGST Act, the same is to be reversed

b. Whether the company can utilze the ITC lying in the Electronic Credit Leger against the GST payable on service income.

Thanks & Regards

AI Summary

Chemical Manufacturer Can Use ITC Balance for GST on Services; Reversal Needed Only if GST Registration is Canceled. A company engaged in chemical manufacturing accrued significant Input Tax Credit (ITC) during the excise regime due to large Plant & Machinery purchases. After closing operations in April 2019, the company paid GST on the sale of these assets using the Electronic Credit Ledger but still has a substantial credit balance. The company queries whether this balance must be reversed and if it can be used against GST on service income. Responses indicate that reversal is only necessary upon canceling the GST registration. The company can utilize the credit for service income GST, needing only to amend its registration to reflect service supply.