• 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 5 months ago in GST from Greater Mumbai, Maharashtra
Hi,

Hope you are doing well !

Nothing worng in your accounting treatment.

You can claim ITC .


Thanks & Regards,
Payal Chhajed
Payal Chhajed
CA, Mumbai
981 Answers
8 Consultations

4.8 on 5.0

Hence, for utilization of ITC credit you can reverse your depreciation and claim ITC in Income tax return.
 

Thanks & Regards,
Payal Chhajed
Payal Chhajed
CA, Mumbai
981 Answers
8 Consultations

4.8 on 5.0

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.
Lalit Bansal
CA, Delhi
559 Answers
37 Consultations

5.0 on 5.0

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.)

Thank you
Chirag Maru
CA, Raipur
52 Answers

5.0 on 5.0

Dear Sir,

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.

Thanks
Vivek Kumar Arora
CA, Delhi
1624 Answers
48 Consultations

5.0 on 5.0

Yes, it is okay to do so
Nikhil Khanna
CA, Mumbai
1375 Answers
17 Consultations

5.0 on 5.0

You can reverse the depreciation and claim ITC. 

Regards,
Nikhil
Nikhil Khanna
CA, Mumbai
1375 Answers
17 Consultations

5.0 on 5.0

Hi

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.
Lakshita Bhandari
CA, Mumbai
2177 Answers
71 Consultations

5.0 on 5.0

Hi,

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.
Abhishek Dugar
CA, Mumbai
3578 Answers
161 Consultations

5.0 on 5.0

Hi

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.
Varun Chawla
CA, Ghaziabad
72 Answers

5.0 on 5.0

yes it can be done.
Swati Agrawal
CA, Indore
680 Answers
1 Consultation

5.0 on 5.0

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