GST Update on Cenvat Credit On Capital Goods In Transit-No Available

The Section 140(5) of the CGST Act states that “A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law, subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day:

Provided that the period of thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding thirty days:

Provided further that said registered person shall furnish a statement, in such manner as may be prescribed, in respect of credit that has been taken under this sub-section”

Thus, it is quite evident that credit of eligible duties and taxes in respect of the inputs or input services which are in transit shall be allowable. However there is no such provision for capital goods in transit. Thus, credit of eligible duties and taxes in respect capital goods received on or after the appointed day but the duty or tax in respect of which has been paid by the supplier under the existing law shall not be allowed.
Thus we recommend that the assessee should ensure the fact that capital goods on which taxes or duties have been levied under existing laws shall be received before the appointed date so that the credit on such capital goods cannot be denied. Else, it should be billed after the appointed date.
An example will clarify the same. Suppose, a machine is despatched on 28.6.2017 after payment of excise duty of Rs. 1,00,000 and reach the registered factory on 30.6.17 then he will be able to take the 50% credit (50,000) on 30.6.17 and rest of the credit of Rs. 50,000/- will be taken as per Section 140(2) of CGST Act, 2017.

But if these goods are received on 1.7.2017 then there is no transitional provision for taking credit. No credit will be allowed on the same and it will be loss to the company. In this regard, it is suggested that the registered person should ask the supplier to despatch of capital goods only after 1.7.2017. The supplier will pay the GST and the credit of full GST will be allowed to registered person.

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GST Update on Cenvat Credit On Capital Goods In Transit-No Available

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