TMI Blog2019 (3) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod on the computers and laptops etc., physically available on 30th June, 2017 - the Computers, Laptops etc., which were lying in stock as on 30,06.2017 were declared as capital assets prior to GST and used by the appellant for providing output services. Thereby they had no tax liability under the erstwhilc KVAT law. Further, they squarely fall under the definition of Capital Goods under Section 2(19) of the KSGST Act, 2017 and not under Section 2(59) of the KSGST Act, 2017. Hence the relevant transitional provision applicable in the instant case is Section 140(2) of the KSGST Act, 2017 and Section 140(3) Of the KSGST Act cannot be invoked. As per section 140(2) of the KSGST Act 2017, a registered person, other than a person opting to pay under Section 10, shall be entitled to take, in his electronic credit ledger, credit Of un-availed input tax credit in respect Of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed. Proviso to the said sub-section of the Kerala SGST Act stipulates that the registered person shall not be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the sale of exempted goods or tax free goods, by whatever the name called, or goods which have suffered tax at the first point of their sale in the State and the subsequent sales of which are not subject to tax in the State under the existing law but which are liable to tax under this Act or where the person was entitled to the credit of input tax at the time Of sale Of goods, if any, shall be entitled to take, in his electronic ledger, credit of the value added tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the condition that; (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is eligible for input tax credit on such inputs under this Act; (iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of tax under the existing law in respect of such inputs; and (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day. 4. The Authority for Advance Ruling had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 30th June, 2017, ITC is not eligible for the VAT paid. 8. Aggrieved by the said Advance ruling, the appellant preferred appeal vide paper read 2nd above, before the Appellate Authority for Advance Ruling. The appellant has stated that the Kerala Authority for Advance ruling has grossly erred in concluding that the closing stock of computers, laptops and other goods lying in the physical possession of the appellant as on 30th June, 2017 do not qualify as 'input' eligible for input tax credit under Section 140(3) of KSGST Act, 2017. GROUNDS OF APPEAL 9. The authorized representative Of the. appellant has stated that the Advance Ruling Authority has primarily relied on Section 140(2) of the Act in ruling that the computers and laptops held by the appellant during the transition period do not qualify for availment Of credit under Section 140(2) of the Act relying on the proviso to the said sub-section. in doing so, the Advance Ruling Authority has incorrectly denied eligibility under Section 140(3) of the Act without a proper examination of the grounds put forward by the appellant or the legal provisions relevant to Section 140(3). The appellant has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such inputs; (iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day. 11. As per Section 2(59) of the Act, input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business . Though the term 'Capital goods' has been defined under Section 2(19) of the Act, an explanation of Chapter XX of the Act specifically states that for the purpose of the said chapter, expression 'capital goods' shall have the same meaning as assigned to it under the Kerala VAT Act, 2003 (30 of 2004). The term 'capital goods' has been defined under Section 2(x) of the Kerala Value Added Tax Act, 2003 to mean plant, machinery, equipments including pollution/quality control lab and cold storage equipments used in manufacturing, processing, excluding for job works or rendering of services, packing of storage of goods in the course of business and delivery vehicles but shall not include such goods and civil structure as may be notified by the Government . 12. On a combined reading of the above definitions, it can be understood that capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Kerala GST Act provides that for the purpose Of transitional provisions, capital goods would have the same meaning assigned to it in the Kerala VAT Act. In the Kerala VAT Act capital goods has been defined to exclude Goods Which are used for rendering services. Since the goods involved are used for rendering services, the same cannot be capital goods and consequently the same would become inputs. Section 140 (3) of the Kerala CST Act, 2017 provide for availment of VAT paid on inputs which are in stock as on 30.06.2017 by a person who was not required to take registration under the Kerala VAT Act. Since the appellant satisfies all the said conditions the appellants would be entitled to take transitional credit of the goods in question under Section 140 (3) of the Kerala CST Act, 2017. It is therefore prayed that this appellate authority passes a ruling that - The goods in question would be treated as Inputs for the purpose Of transitional provisions under the Kerala GST Act The Kerala VAT paid on the goods in question can be availed as transitional credit under sec. 140 (3) of the Kerala GST Act, 2017. 14. The contentions raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby they had no tax liability under the erstwhilc KVAT law. Further, they squarely fall under the definition of Capital Goods under Section 2(19) of the KSGST Act, 2017 and not under Section 2(59) of the KSGST Act, 2017. Hence the relevant transitional provision applicable in the instant case is Section 140(2) of the KSGST Act, 2017 and Section 140(3) Of the KSGST Act cannot be invoked. vi) As per section 140(2) of the KSGST Act 2017, a registered person, other than a person opting to pay under Section 10, shall be entitled to take, in his electronic credit ledger, credit Of un-availed input tax credit in respect Of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed. Proviso to the said sub-section of the Kerala SGST Act stipulates that the registered person shall not be allowed to take credit unless such credit was admissible as input tax credit under the existing law and is also admissible as input tax credit under the Act. vii) The appellant being a service provider, had no tax liability under the erstwhile KVAT Act, and the ..... 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