As we all know GST is a business reform and the major purpose of bringing GST is to stop bogus billing and fake invoice which result s in revenue loss,so government has made it fully affords to clarify the provision of input tax credit. In the GST law ‘input’ has been defined in layman language which means ‘which is not capital goods’, so any input tax which is used for the purpose of business can be claimed as input tax credit.
You will have to remember the provisions on which you cannot claim the benefit of input tax credit which has been mentioned as follow:
- You cannot avail benefit of GST paid by you on MOTOR VEHICLE but in following businesses you can avail benefit as ITC a. further supply of such vehicle or conveyances b. Transportation of passengers/goods c. Imparting training on driving, flying
- GST paid on PERSONAL USE of foods , beauty treatment, health
- Membership of club fees
- Renting a cab (fare paid to driver of OLA or UBER driver)
- Life insurance (GST includes on premium paid)
The above mentioned expenses are of personal use that’s why government has not allow the benefit of ITC on such expenses.
- When you purchased goods from a dealer who has opted for composition scheme
- When goods are STOLEN/DESTROYED/distributed as a FREE SAMPLES
Input Credit on CAPITAL GOODS:- One of the major benefit that government has given to the tax payer the you can avail the input benefit of GST paid in ONE YEAR. As present laws provides for 2 years.
Now a question arises in mind, what is capital goods?? The definition of capital goods is very simple and easy to understand. We have broken the definition in very simple way which is as follow
- Value of capital goods is capitalized in books of accounts
- It is used or intended to be used for business
First point clarify that if you capitalized in books of account as a capital assets not as an input, and second point says it used for business purpose not for personal use.
Removal of capital goods after use:- If you remove capital goods after usage then you have to pay GST on higher of the following :-
- Sale value of such capital goods
- Percentage of input reduced as government may prescribe.
Important point to be note:
- If depreciation claimed on depreciation part then GST paid on capital goods cannot be claimed.