Loss of capital goods

[Kaustubh Karandikar]

Capital Goods on which either VAT or ITC was claimed, were not traceable during physical verification. Therefore, where credit of VAT was claimed, SGST was paid on depreciated value and where ITC was claimed, GST was paid on depreciated value. Sir, in my view since goods were not supplied at depreciated value but were lost / not traceable, the full ITC needs to be reversed and where VAT credit was claimed in the VAT regime, there was no need to pay GST/ reversal of ITC. Is my understanding correct?

[Shilpi Jain]

Where it was VAT credit no need to reverse as no ITC was claimed.

As far as ITC claimed, since the goods were lost , reversal of actual credit may be required as it is blocked under 17(5). However, if the capital goods were put to use for business and for taxable supplies, then a stand can be taken that the credit had become a vested right and any reversal thereafter will require express provision for reversal or payment. Sine gst does not have such provisions, no reversal required. Though this can be an aggressive stand.

AI Summary

Reversal of input tax credit may be unnecessary if capital goods' credit had vested, though this is an aggressive position. Where VAT credit alone was claimed there is no ITC reversal on loss of capital goods; where ITC was claimed, reversal of actual credit may be required because such credits are blocked under the provision commonly referenced as 17(5). An alternative argument is that if the capital goods were used for business and taxable supplies the ITC had vested and no statutory reversal is provided, though that is an aggressive position.