Q.13 [S. 18(6)]: M/s A Ltd. sold plant and machinery after being used in the manufacture of goods for ₹4,00,000 on 1-11-2023. GST is payable on transaction value of plant and machinery at 18%. M/s A Ltd. purchased this machine on invoice dated 22-11-2022 for ₹5,50,000 plus GST 18%. M/s A Ltd. availed credit on said plant and machinery. Find the amount payable by M/s A Ltd. under section 18(6) of the CGST Act, 2017.
Answer (1)
To find the amount payable by M/s A Ltd. under Section 18(6) of the CGST Act, 2017, we need to understand the input tax credit (ITC) and its reversal. Section 18(6) requires the reversal of ITC when capital goods or plant and machinery are sold.
Given:
Sale Price of the machine: ₹4,00,000
GST on Sale (18% of ₹4,00,000):
GST on Sale = 100 18 × 4 , 00 , 000 = 72 , 000
Purchase Price of the machine: ₹5,50,000
GST on Purchase (18% of ₹5,50,000):
GST on Purchase = 100 18 × 5 , 50 , 000 = 99 , 000
Since the machine was purchased on 22-11-2022 and sold on 1-11-2023, it was used for a period of 11 months.
The ITC value allowable per month = Total ITC / 60 months (since useful life of asset is taken as 5 years or 60 months under GST)
Monthly ITC allowable = 60 99 , 000 = 1 , 650
For 11 months, the ITC allowable = 11 months × ₹1,650 = ₹18,150
The ITC to be reversed on the sale will be the higher of:
ITC availed - ITC allowable for the period used = ₹99,000 - ₹18,150 = ₹80,850
Tax on transaction value = ₹72,000
The ITC to be reversed will be the higher amount, which is ₹80,850.
Therefore, the amount payable by M/s A Ltd. under Section 18(6) of the CGST Act, 2017, is ₹80,850.
