GST Update on Issues in Annual Return-Part I

There are many ambiguities in the presentation of data in the Annual Return to be filed by the assessees. This update intends to discuss one of the genuine doubt as regards bifurcation of input tax credit into inputs, input services and capital goods as desired under Part-III, Table 6 of GSTR-9. The bifurcation of input tax credit into inputs, input services and capital goods will be a tedious task for assessees as till date they were not compiling such information in the monthly returns filed by them.
Moreover, the issue would be complicated in cases where the inputs, input services are being capitalized by the assessee.
As it is known that the definition of capital goods under section 2(19) of the CGST Act, 2017, capital goods means goods the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

It is quite possible that the assessee has received inputs and input services but has capitalized the same in its books of accounts. In such a situation, whether the consolidated amount capitalized is to be reflected as capital goods credit or further bifurcation of input tax credit as inputs and input services is required?

The issue under consideration in this update is that in respect of Purchase of Capital Goods, the whole of the input / input services up to the date of installation are capitalized under the head capital assets (vis. capital goods) only. However, the Table 6 requires the bifurcation of input tax credit as Inputs, Input Services and capital goods. The point of concern here is that whether the Input/ Input Services availed up to the date of installation is to be considered as capital goods or under the respective heads of Inputs/ Input Services?

The above case can be explained with help of an illustration:-
If a Machinery is purchased from Mr. A Rs. 118 Lacs (Rs.100 + 18 GST @18%)
Freight Charges paid to the Transport company XYZ Rs. 11.20Lacs (Rs.10 + 1.2 GST @12%)
Machine Installation charges Rs. 23.60 Lacs (Rs.20 + 3.6 GST @18%)
Total Cost Capitalized for Machinery Rs. (100+10+20)
Total ITC Available Rs. 22.80 Lacs

The question hereby arises that whether the ITC of Freight being Rs. 1.2 lakhs and that pertaining to installation being Rs. 3.6 Lakhs is required to be mentioned under the head Capital Goods or as Input Services? In our opinion, the ITC pertaining to freight and installation should ideally be reflected under the category of input services. However, deriving this bifurcation practically would be a tedious task for the assessees and the auditor.

Similarly, another example to highlight our problem can be the invoice pertaining to Repair and Maintenance of Vehicles where the invoice includes the charges for inputs utilized in repairing in addition to the labour charges. The bifurcation of such Input Tax Credits as inputs and input services would again be a tedious job to be done invoice wise for the purpose of Table 6, Part III of the GSTR-9.

Well, it has been represented by the ICAI and industry that the requirement of classifying the input tax credit is not a fruitful exercise for the assessees and should be dispensed with because the bifurcation would require lot of exercise as the accounting policy of the assessee would require a substantial change which is not possible at such short notice.

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GST Update on Issues in Annual Return-Part I

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