GSTR-3B is the form in which Input tax credit
(ITC) is being claimed till today. GSTR-3B warrants details of Input tax credit
in to Integrated tax (IGST), Central tax(CGST) and State tax(SGST). Form never
intend us to provide details of ITC into Input, Input service and Capital
Goods.
Now, when we are filing GSTR-9, we got struck
seeing Table-6, which wants Input tax credit break up in to Input, Input
service and Capital goods.
Before we go ahead, lets visit definition of Input,
Input service and capital goods first as per GST law.
As per section 2 (59) “input” means any goods other than capital
goods used or intended to be used by a supplier in the course or
furtherance of business.
As per section 2 (60) “input service” means any service used
or intended to be used by a supplier in the course or furtherance of business.
As per section 2 (19) “capital goods” means
goods, the value of which is capitalized
in the books of account of the person claiming the input tax credit and which
are used or intended to be used in the course or furtherance of business.
I want to highlight you definition of capital goods, which begins with
the word capital goods means "Goods"....... Now
look at the below mentioned example.
Registered person has purchased Machinery worth Rs.50 lakh and paid transportation
charges of Rs.2 lakh to transporter to deliver machinery from supplier’s
premises to his own premises. As per Income tax Act, Registered person has
capitalized Machinery with Rs.52 lakh (Value of Machinery Rs.50 Lakh + Transportation
charges Rs.2 Lakh). On contradictory, As per GST Law, Capital goods means Goods…..
so Transportation charges of Rs.2 lakh which is service can not be said to be capital goods and
registered person need to bifurcate ITC charged with Rs.50 lakh as capital goods and ITC that charged with
transportation expenses are termed as Input
service.
What should Registered person do while
filing GSTR-9?
Those using SAP / Fledged ERP must have system to tag category of ITC at the time of accounting entry but those registered person who hasn't tagged such category at the time of accounting entry can take base of some of the following criteria to broadly
identify ITC into Input / Input service and Capital goods.
1.
Based on HSN/SAC
HSN/SAC starting with 99 pertains to Input
service and other than may be belong to Input or capital goods.
2.
Based on Vendor Name
· Identify vendors supplying
either only goods or service or only capital goods. E.g. Raw Material supplier
will pass on ITC of inputs always and Lawyer / Professional / Repairing service
provider will always pass on ITC of Input service only. Same way registered
person knows vendors from whom capital goods are procured, ITC passed on from
such vendors will be generally nature of capital goods.
3.
Based on Ledger Head
· Identify
nature of Accounting ledgers which can be base to identify break up:
ITC
of Input
o
Purchase
of RM/PM
o
Trading
Purchase head
o
Stores
and Consumables
o
Stationary
Expenses etc.
ITC
of Capital Goods
o
Fixed
Assets addition
ITC
of Input service
o
Professional
/ Legal Fees
o
Transportation
Expenses
o
Rent
& Insurance
o
Trademark
and Royalties
o
Bank
charges etc.
One may have many such other method to derive break up of ITC.
Why there is
additional requirement?
If you refer to original compliances method by
GSTN, one need to file GSTR-2 and claim ITC. Format of Table-3 of GSTR-2 is as
below:
At the time of filing GSTR-2, we already need to
furnish break up of ITC into Input / Input service or capital goods, but GSTR-2
is not active as of now so we don’t have ready break up for the same. Had
GSTR-2 been continued, details required shall be auto populated.
Hope this article will be helpful to you!
CA Hiren Pathak
(M) 9033655245
