Switching from composition scheme to normal scheme of payment of tax - Whether the assessee is eligible to avail Input Tax Credit (ITC) on inputs or capital goods held in stock? How to determine the amount of ITC on capital goods to be availed?

Manual - Composition Scheme in GST

Section 10 - Composition levy.

Section 18 - Availability of credit in special circumstances.

THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Rule 40 - Manner of claiming credit in special circumstances

Central Goods and Services Tax Rules, 2017

As per section 18(1)(c), he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax u/s 9 ( Section 9 = under normal scheme of payment of tax)

Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed.

As per Rule 40(1)(a), ITC on capital goods shall be claimed after reducing the tax paid on such capital goods by five percentage (5%) points per quarter of a year or part thereof from the date of the invoice or such other documents on which the capital goods were received by the taxable person.

It is important to note that in respect of inputs and capital goods, as per section 18(2), a registered person shall not be entitled to take input tax credit under sub-section (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.

Dated: 10-8-2017