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

[Rajagopalan Ranganathan]

Sir,

Only when you surrender your registration certificate for cancellation you have to reverse credit balance lying in your electronic credit ledger. Since you continue your business of supplying service you can utilize the credit balance available for discharging gst on the services supplied by you. Only action to be taken by you will be to amend your registration certificate indicating that you are supplier of service instead of manufacturer/supplier of goods. If you have registered for both supply of goods and service you can continue to do so without any amendment to registration certificate.

[Alkesh Jani]

Shri

I agree with views expressed by our expert.

AI Summary

Input tax credit utilisation can cover GST on services but must be reversed on surrender of registration. Reversal of the electronic credit balance is required only upon surrender/cancellation of the registration certificate; if the taxpayer continues to supply services, the input tax credit in the electronic credit ledger may be utilized to discharge GST on those services. The taxpayer should amend registration to indicate supply of services if it is currently described as a manufacturer, but no amendment is needed if registration already covers both goods and services.