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GST Update-18.06.2016

SECTION 2(20) CAPITAL GOODS

 
GST DAILY DOSE OF UPDATION:-
 
 
SECTION 2(20) CAPITAL GOODS:-
 
The definition of capital goods proposed in the new GST regime is exactly the same definition that is prevalent in the Rule 2(a) of the Cenvat Credit Rules, 2004 thereby giving an indication that the goods which will be considered as capital goods and the provisions of cenvat credit of capital goods will be more or less same as presently in force. This also has the effect that the complexities or ambiguities prevalent and the restrictions for credit availment will be imported into the new so called ‘simplified unified taxation regime’.
 
Presently, the cenvat credit pertaining to rent-a-cab services are not available except in case of certain service providers for which the motor vehicle is treated as capital goods such as transportation of passengers, renting of such motor vehicle, imparting motor driving skills, courier agency services. The incorporation of similar definition of capital goods as prevalent in the Cenvat Credit Rules, 2004 clearly reflects the intention of the government not to allow seamless cenvat credit, which is avowed and proclaimed motto of the new taxation regime.
 
On the contrary, if the definition of inputs as stated in section 2(54) and that of input services stated in section 2(55) as proposed in GST Act, 2016 is observed, it is found that the restrictions prevalent in present laws have been dispensed with and the definition of inputs has been made very wide as ‘any goods other than capital goods’ and input services as ‘any service subject to exceptions as specified’. Consequently, it was hoped that the definition of capital goods was also made of wider scope removing the restrictions of chapter headings as presently applicable.
 
Nonetheless, the definition of the capital goods as proposed in the GST Act, 2016 creates doubts about the uniqueness and simplifications in the new taxation regime as the present litigation prone points appear to be imported into the new taxation regime also.

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