Kerala AAR: Computers, laptops etc. used for providing output service would not qualify as inputs for the purpose of availing transactional ITC u/s 140(2) / 140(3) of KSGST Act

Categories: Advance Ruling
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Facts: M/s. Geojith Financial Services Ltd is engaged in providing various retail financial services like stock broking, share broking, marketing of initial public offering of companies and mutual funds, corporate advisory services etc. which were not taxable under VAT Law. Based on the transitional provisions, they have claimed input tax credit on closing stock of computers, laptops and other goods lying in the physical possession of the applicant as on June 30, 2017.

Issues involved:

1.Whether computers, laptops etc. used by the applicant for providing output service would qualify as inputs for the purpose of availing transitional ITC under Section 140(3) of KSGST Act?

2. If the goods are physically available as closing stock as on June 30, 2017, can the applicant avail ITC for the VAT have paid?

Held: The Hon’ble AAR of Kerala vide Advance Ruling No. KER/13/ 2018 dated September 19, 2018 pursued the appellant plea in detail and observed that, The applicant being a service provider had no tax liability under VAT regime. As per the proviso to Sub-Section (2) of Section 140 of the GST Act, a registered person shall not be allowed to take credit unless such credit was admissible as input tax credit under the existing law and is also admissible as input tax credit under GST Act.

As per Section 2(59) of GST Act, ‘input’ means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. The computers, laptops etc. were used by the applicant for providing output service are capital assets. These capital goods are ineligible to claim input tax credit under VAT Laws. Section 140(3) of the GST Act covers “credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day”, hence, the transitional credit claim of the assessee in respect of capital goods is not acceptable.

In view of the supra observations, the following rulings are issued as under:

i) The computers, laptops etc. used by the applicant for providing output service would not qualify as inputs for the purpose of availing transitional ITC under Section 140(2) /140(3) of the KSGST Act.

ii) The goods, even though physically available as closing stock as on 30th June 2017, ITC is not eligible for the VAT paid.

Citation: [2018] 98 taxmann.com 160 (AAR-KERALA)

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