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GST is to be Paid on Capital Goods or Plant and Machinery if they are Supplied or Sold Outward after Use [Section 18(6)]

In case of supply of capital goods or plant and machinery, on which input tax credit has been taken are supplied outward by the registered person he shall pay an amount equal to—

— the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed, or

— the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher.

However, where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined under section 15

Rule 44(6): The amount of input tax credit availed earlier which is subsequently required to be paid under section 18(6) on supply of capital goods shall be determined in the same manner as prescribed in Rule 44(1)(b) and the amount shall be determined separately for input tax credit of IGST and CGST. Where the amount so determined is more than the tax determined on the transaction value of the capital goods, the amount determined shall form part of the output tax liability and the same shall be furnished in FORM GSTR-1.

Example :

R Ltd. provides the following information:

Date of invoice in respect of purchase of plant and machinery

1.11.2017

Rs.

Value of Plant and Machinery excluding GST

20,00,000

GST charged in respect of Plant and Machinery @ 1 8%

3,60,000

Date of supply of Plant and Machinery owing to obsolescence

10.1.2019

Value of outward supply of Plant and Machinery

12,00,000


Determine how much amount of GST to be paid on the supply of such machine.

Solutions :

In the light of above information, the amount to be paid by R Ltd. shall be computed as under :

A.

Input tax credit taken on purchase of Plant and Machinery

Rs. 3,60,000

B

Time gap in quarters between date of purchase and supply of plant and machinery

1 year 2 months and 10 days i.e. 5 quarters (including part of the month)

C.

Rate of Reduction in tax paid

5% Points per quarter of a
year or part thereof (as the total life is
taken as 5 years amounting to 20
quarters)

D.

Total reduction in tax paid for five quarters or part thereof

Five percentage point x 5 quarters = 25% Points

E.

Amount of Reduction in tax paid

25% x of Rs. 3,60,000 = Rs. 90,000

F.

Amount of GST to be paid on the basis of reduction in input tax credit taken [A-E]

Rs. 2,70,000

G.

Transaction Value of the Plant and Machinery

Rs. 12,00,000

H.

Tax on the transaction value of Plant and Machinery

Rs. 2,16.000 [Rs. 12.00.000 x 18%]

I.

in terms of Section 18(6) amount to be paid-Higher of the amount given at Si. No. F and Sl. No. H

Rs. 2,70,000

 
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