GST credit on capitalized items
We have made some capital expenditure in business during FY 2017-18. By error, GST input credit available on such purchases was not taken and was added as cost to the acquisition cost of asset and hence capitalized in FY 2017-18. Accordingly, depreciation has also been taken in FY 2018. Now, in June, this error was discovered and now we want to decapitalize this value and take input tax credit under GST.
Pl advice whether this is fine as per law or can it lead to some issues.
Asked 3 months ago in GST from Greater Mumbai, Maharashtra
Hope you are doing well !
Nothing worng in your accounting treatment.
You can claim ITC .
Thanks & Regards,
Hence, for utilization of ITC credit you can reverse your depreciation and claim ITC in Income tax return.
Thanks & Regards,
You have 2 options
Either book GST as ITC or capitalized GST and book depreciation , now in your case you take it as cost thus now you have to revised your ITR and claim GST input in current month period
You can avail any missed input of FY 2017-18 up to [deleted] without any problem.
Either you can add credit to Cost of acquisition & later claim Depreciation on GST credit available or claim straight forward credit. Both the ways are correct. So what you have done is not error.
It is your accounting policy which is completely correct.
If you want to increase your income it will be good if you capitalize such ITC & if you want to decrease profit claim ITC upfront.
If you want to take credit now, GST annual return filed before September will allow to claim such rectified Credit.
(Assumption - you have not freezed your Balance sheet.)
In case of ITC under GST, you have two options either claim it as ITC or add into cost and claim depreciation. As it is a case of first year after implementation of GST and you had already filed GST returns but not income tax return. You can reverse depreciation and claim ITC but it should not fall under blocked credit. For F.Y. 2017-18, you can claim ITC up to 20.10.2018 GST return.
You can reverse the depreciation and claim ITC.
Yes, you can do so.
For this, you can claim the ITC in the current month.
Decapitalization can be done in books so that depreciation is reversed. Income tax return, if filed, will have to be revised to reduce the depreciation claim.
Firstly, let me clarify that this is not an error. You can add it in cost of asset if you don't want to take itc.
However, now if you want to take ITC, you can take the same while filing your annual return in October. You will have to deduct the cost of asset from Itc value.
You can take the input credit now but you have made rectification entries in books of accounts, there is no bar in input credit of capital item in subsequent year, there is only one condition that credit will be allowed only before the filling of annual return u/s 39 of CGST Act.
Please be note that you can't claim depreciation in income tax for FY 2017-18.
Hope It will be helpful.