Page 38 - Chap7 ITC

Particulars IGST (₹) CGST (₹) SGST (₹)
Inputs held in stock since 2nd September - 4,500 4,500
Inputs received on 21st July contained in semi-finished goods held - 7,500 7,500
in stock
Inputs contained in finished goods held in stock which were procured Nil Nil Nil
on 19th September last year [Invoice issued prior to one year, hence
ITC cannot be availed]
Inputs held in stock since 13th September 9,000 - -
Capital goods procured on 12th September - Nil Nil

Total ITC 9,000 12,000 12,000

Q.29
Vijay Pvt. Ltd. of Chennai, Tamil Nadu, exclusively manufactures and sells product 'V2Z' which is
exempt from GST vide notifications with certain taxable supplies. The company sells product 'V2Z' only
within Tamil Nadu and it is registered under GST under regular scheme. Further, all the inward supplies of
the company are taxable under forward charge. The company expects the sales to grow in the current year.
Owing to the growing demand for the product, the company decided to increase its production capacity and
purchased additional machinery exclusively used for manufacturing 'V2Z' on 1st August, 20XX. The
purchase price of such machinery was ₹ 45 lakh (exclusive of GST@ 18%).
However, with effect from 1st December, 20XX, exemption available on 'V2Z' was withdrawn by the
Central Government and GST @ 12% was imposed thereon. Can Vijay Pvt. Ltd take input tax credit on
additional machinery purchased exclusively for manufacturing 'V2Z'? If yes, then when and how much
credit can be availed? Advice Vijay Pvt. Ltd. on the above issues with reference to the provisions of GST law.
Correct provisions of law should form the part of your answer. [CA Final Nov 24 Exam]
Answer:
Ü Where an exempt supply of goods by a registered person becomes a taxable supply, such person shall be
entitled to take ITC, in respect of capital goods exclusively used for such exempt supply on the day
immediately preceding the date from which such supply becomes taxable i.e. Nov 30, 20XX.

Ü ITC on capital goods can be claimed after reducing the tax paid on such capital goods by 5% per quarter of a
year or part thereof from the date of the invoice.
Ü Thus, Vijay Pvt. Ltd. can take following amount of ITC on additional machinery purchased exclusively for
manufacturing “V2Z” by making an electronic declaration in prescribed form specifying the details of capital
goods on the day immediately preceding the date from which such supply becomes taxable within 30 days of
becoming eligible to avail ITC:
= (₹ 45 lakh × 18%) - (₹ 45 lakh × 18% × 5% × 2 quarters)
= ₹ 8,10,000 – ₹ 81,000
= ₹ 7,29,000

10: Sec 18(3): Transfer of credit on sale, merger, amalgamation, etc.

Q.30
Daksh Ltd a registered manufacturer demerged its entity into DG gold Ltd and DG gold testing Ltd.
The total value of Assets of Daksh Ltd is ₹ 45,00,000 and unutilized credit on account of CGST, SGST and
IGST amounted to ₹ 56,000, ₹ 65,000 and ₹ 75,000 respectively. The value of assets of DG gold Ltd and DG
gold testing Ltd. is ₹ 20,00,000 and ₹ 25,00,000 respectively. Discuss the eligibility of credit transferred to the
new units on account of Demerger.
Answer:

Ü ITC can be transferred during business restructuring (sale, merger, demerger, etc.) if liabilities are also
transferred [Sec 18(3)]

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