CAPITAL GOODS DEFINITION AND
INPUT TAX CREDIT ELIGIBILITY
Capital
goods are, in general, the movable assets like Plant and machinery used in
industry, for manufacture of goods. but do not mean goods (stock-in-trade) for
sale.
“Capital
goods” means,
a) plant, machinery, equipment, apparatus,
tools, appliances or electrical installation for producing, making, extracting
or processing of any goods or for extracting or for bringing about any change
in any substance for the manufacture of final products;
b) Pollution control, quality control,
laboratory and cold storage equipment;
c) Components spare parts and accessories
specified at (a) and (b) 12 above;
d) moulds, dies, jigs and fixtures,
e) refractors and refractory materials,
f) Storage tanks; and
g) tubes, pipes and fittings thereof; and
used in the State for the purpose of manufacture,
processing, packing or storing of goods in the course of business excluding
civil structures and such goods as may be notified by the Government.
Capital
goods held in closing stock were not eligible for input tax Credit.
Goods
notified by the Government are not eligible for Input Tax Credit which are
under the negative list and not eligible for the Capital Goods purchased before
1.1.2007
Every
registered dealer while submitting monthly returns to the assessing
authority/can claim the Input Tax Credit paid for all local purchases made from
registered dealers on the basis of Original Tax Invoices in those returns
itself for Capital Goods, after the commencement of commercial production. They
can deduct the same from the Output tax, if any, payable on the local sales or
inter-State sales in those monthly returns.
In the
first year of commencement of commercial production, upto 50% of the input tax
credit can be availed in the same financial year and the rest before the end of
third financial year.
At the
end of the third year, any credit not availed will be lapsed to Government.
INPUT
TAX CREDIT ELIGIBLE IN THE FOLLOWING CASES
|
INPUT
TAX CREDIT NOT ELIGIBLE IN THE FOLLOWING CASES
|
Capital goods for use in the manufacture of taxable
goods
[Section
19(2)(iv)]
|
Capital goods used in the manufacture of exempted
goods under Section 15.
Section
19(6)
Rule
10(4)(d)
|
Capital goods should be purchases from the
registered dealers within the State with TIN
[Rule 10(4)(b)]
|
Capital goods purchased prior to the commencement of
the Tamil Nadu Value Added Tax Act, 2006.
Rule
10(4)( c)
|
Parts and accessories for Capital goods already
purchased and use in manufacture of taxable goods is entitled to input tax
credit relating to such goods in the month of purchase or thereafter.
[Rule
10(4)(b)]
|
|
Deduction of Input Tax Credit shall be allowed only
after the commencement of commercial production and over a period of three
years.
[Rule
10(4)(b)]
|
|
Unavailed input tax credit on capital goods after
the expiry of three years, shall stand lapse to Government.
[Sec.19(3)(b)
[Rule
10(4)(b)
|
|
Date of commencement of commercial production should
be reported to the assessing authority within 30 days.
[Rule
10(4)(a)]
|
|
Input Tax credit adjustment allowable to avail upto
50% in the same financial year and the balance of input tax credit before the
en d of third financial year, provided that the goods are in the possession
of the dealer.
[Rule
10(4)(b)]
|
As above
Input Tax Credit adjustment is allowable only if the capital goods are used in
the manufacture of taxable goods and if it is used for exempted goods Input Tax
Credit adjustment is not allowable. If a
dealer uses the capital goods for manufacture of taxable goods and exempted
goods the adjustment of ITC should be made applying the following formulae.
Total Amount
of Input Tax paid Sales Turnover of Taxable
on the
purchase of capital goods X goods and Zero Rated sales
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Total Sales
Turnover of taxable goods, zero rated sales and
sales of
exempted goods)