SALE OF BUSINESS ASSETS UNDER GST

[SOPL SOPL]

Dear Sir/Madam

Good Morning

At the time of sale of business assets with in 5years on which Gst input is taken in books, do we need to satisfy both the following conditions:

1.Collect Gst on Sale Invoice and pay to Government.

2.Reverse proportionate input for the balance life of asset considering life of asset as 5 years (5% Depreciation per Quarter).

Logically speaking, full input on asset is available only when the asset is used for taxable supplies for a period of 5 years.So when asset is sold in middle, we have to reverse input for balance life.Further Gst collected on transaction value is on behalf of Government and should be paid to Govt.Input is claimed by recipient.

But in GST law it is said that whichever is higher out of above two conditions should be paid on sale of asset.

Kindly clarify

Thank you.

[Ganeshan Kalyani]

Sir, Sec.18(6) r.w.r 40(2) states that if the capital goods or plant and machinery on which input tax credit has been taken the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by 5% per quarter OR the tax on transaction value whichever is higher.

[SOPL SOPL]

Any other comments

[Shilpi Jain]

Yes you need not pay both. it is a either GST on the sale value or the ITC portion after taking the 5% per quarter deduction Which ever is higher

AI Summary

Input tax credit reversal or GST on sale determines tax liability when capital goods are sold early.
When capital goods or plant and machinery on which input tax credit has been taken are sold before the prescribed holding period, the seller must either pay GST on the transaction value or reverse the unavailed portion of input tax credit after applying a prescribed quarterly reduction; the seller is liable to pay the higher of those two amounts.