SECTION 18(6) OF THE CGST ACT READ WITH RULES 40 AND 44

[SOPL SOPL]

Dear Sir

At the time of supply of capital goods on which input tax credit is taken, do we need to comply both the conditions i.e paying tax on transaction value and reversing input tax credit for remaining useful life of the asset (reducing total input by 5% per quarter)

or

is it sufficient to pay any one i.e higher of the above two conditions.

In CGST Act, 2017 ,it is clear if we pay higher of the both conditions.

Kindly provide your reply with analysis quoting circulars, clarifications , advance rulings if any.

AI Summary

Tax on supply of capital goods: pay the higher of the ITC based amount or the tax on transaction value.
Section 18(6) requires payment on supply of capital goods equal to ITC taken reduced by prescribed percentage points over time or the tax on the transaction value, whichever is higher. Rule 40(2) sets the time based reduction method and Rule 44(6) prescribes determination of the ITC component and mandates that where that amount exceeds tax on transaction value it be included in output tax liability and reported. Forum commentary records disagreement whether both forward tax and the special computation apply or only the higher calculation must be paid; conservative practice is to pay the higher amount and treat that as satisfying any reversal concern.