Capital Goods can be claimed as input tax credits under GST under the Marginal Scheme: AAR.

Nov 5, 2022 | GST FAQ, News | 0 comments

Capital Goods can be claimed as input tax credits under GST under the Marginal Scheme: AAR.


The Karnataka Authority for Advance Ruling (AAR), held that claim of Input Tax Credit can be made on Capital Goods under Marginal Scheme.

The applicant, M/s Attica Gold Private Ltd is into the sale of second-hand goods i.e used gold jewellery which they are buying from individual persons and hence they following “Marginal Scheme” for discharging the GST liability under Rule 32(5) of the COST Rules 2017. The Applicant wants to know whether they can claim Input Tax Credit on the expenses like Rent, Advertisement expenses, commission, Professional expenses and other like expenses while being under Marginal Scheme.

Rule 32(5) of COST Rules, 2017 says that, a taxable supply provided by a person dealing in buying and selling of second-hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price. If the value of such supply is negative, then it shall be ignored.

Hence Rule 32(5) clearly bars availing of input tax credit on the purchase of those second-hand goods which he is supplying, however there is no restriction on the availing of input tax credit in respect of input services or capital goods.

The applicant has sought advance ruling in respect of the following question as to whether ITC is allowed to be claimed on Capital Goods for the Applicant under Marginal Scheme.

The Bench consisting of Dr. M.P. Ravi Prasad Additional Commissioner of Commercial Taxes Member (State) and Kiran Reddy T Additional Commissioner of Customs and Indirect Taxes Member (Central) observed that “ITC can be claimed on Capital Goods by the Applicant under Marginal Scheme subject to section 16 to 21 and rules 36-45 of CGST Act a d Rules 2017.”

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