ITC reversal on fixed assets written off in the books

[Ramesh Pokar]

A private limited company has written off the residual value of computers in its books of accounts at the end of their useful life of 3 years, as per Schedule II of the Companies Act.

Is ITC reversal required? If yes, should it be done under Rule 40(2) or as per Schedule I of the CGST Act?

Is it not an anomaly in the law that the Companies Act provides a useful life of 3 years for computers, whereas the GST law provides 5 years?

Request valuable inputs from the experts. Thank you

AI Summary

ITC reversal on written off capital assets contested - applicability hinges on write off versus permanent transfer under GST.
Whether ITC reversal is required when computers are written off in company books is disputed. Some view Section 17(5)(h) as rendering ITC ineligible for goods written off, while others say Rule 40(2) or the Schedule I deeming provision apply only where there is a factual permanent transfer, disposal or deemed supply. A key practical distinction is between accounting depreciation/write down and an actual disposal; no specific GST mechanism clearly addresses reversal where used capital goods are written off, lost, stolen or destroyed.