Computers, Laptops etc used for providing output service would not qualify as Transitional inputs [AAAR]

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Studycafe | Mar 23, 2019 | Views 1661743

Computers, Laptops etc used for providing output service would not qualify as Transitional inputs [AAAR]

Computers, Laptops etc used for providing output service would not qualify as Transitional inputs [AAAR]

Ruling by Kerala Appellant Authority for Advance Ruling in matter of M/s Geojit Financial Services Ltd : The computers, laptops etc. used by the appellant for providing output service would not qualify as inputs, though they are physically available as on 30th June 2017 for the purpose of availing transitional input tax credit of the VAT paid during the pre-GST period) under Section 140 of the KSGST Act 2017. Therefore the appeal is disallowed.

Computers, Laptops etc used for providing output service would not qualify as Transitional inputs [AAAR]

Extract of ruling is given below :

DISCUSSION AND FINDINGS

13. The authorized representative of the appellant was heard. During the personal hearing, the authorized representative reiterated the contention raised in the grounds of appeal and further expressly deposed as follows:

The issue in the present case is with respect to eligibility to avail transitional credit of Kerala VAT paid by a service provider prior to GST on goods which are lying on stock as on 30.06.2017.

In this regard it was submitted that Section 2(59) of the Kerala GST Act defines inputs as any goods other than capital goods used by a supplier in the course or furtherance of business.

Explanation to Section 142 of the Kerala GST Act provides that for the purpose of transitional provisions, capital goods would have the same. meaning assigned to it in the Kerala VAT Act. In the Kerala VAT Act capital goods has been defined to exclude Goods which are used for rendering services.

Since the goods involved are used for rendering services, the same cannot be capital goods and consequently the same would become inputs.

Section 140 (3) of the Kerala GST Act, 2017 provide for availment of VAT paid on inputs which are in stock as on 30.06.2017 by a person who was not required to take registration under the Kerala VAT Act. Since the appellant satisfies all the said conditions the appellants would be entitled to take transitional credit of the goods in question under Section 140 (3) of the Kerala GST Act, 2017.

It is therefore prayed that this appellate authority passes a ruling that-

The goods in question would be treated as Inputs for the purpose of transitional provisions under the Kerala GST Act

The Kerala VAT paid on the goods in question can be availed as- transitional credit under sec. 140 (3) of the Kenda “GST Act, 2017.

14. The contentions raised by the appellant have been examined in detail. The issue to be decided in this appeal is whether the Computers, Laptops etc used by the -appellant for providing output service would qualify as “Inputs” for the purpose of availing transitional input tax credit under the transitional provisions of the KSGST Ad 2017.

i) The appellant is engaged in providing retail financial services like stock broking, share broking, marketing of initial public offering of companies and mutual funds, corporate advisory services etc.

a. In the pre-GST period, the services provided by the Appellant did not have any liability under the Kerala VAT law and the Computers, Laptops etc., used by them were stated as Capital Assets in their books of accounts.

b. In the GST period the services provided by the Appellant are liable to GST and the Computers, Laptops etc., used by them are continued to be stated as Capital Assets in their books of accounts.

ii) Section 2(19) of the KSGST Act 2017 defines capital goods” as

“goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.

” Further Section – 2(59) of the KSGST Act 2017 defines “inputs” as

“any goods other than capital goods used by a supplier in the course or furtherance of business.”

iii) Hence from the points (i) and (ii) above it is clear that in the GST period, the input tax credit of Tax paid on Computers Laptops etc. can only be claimed as “Capital Goods” but not as “Inputs ”

iv) As per Clause (ii) of Section 140(3) of the KSGST Act 2017, a registered person is eligible for Input ‘fax credit, if he is also eligible under the KSGST Act, 2017 to claim the Input Tax credit on such inputs. Since the Compute, laptops etc. fail to qualify as input under KSGST Act, 2017 and thereby fail to satisfy the condition set under Clause (ii) of Section 140(3) of the KSGST Act 2017, hence they are not eligible to claim Input Tax credit under transitional provisions of the VAT pa.id during the pre-GST period on the computers and laptops etc., physically available on 30th June, 2017.

v) Further the Computers, Laptops etc., which were lying in stock as on 30.06.2017 were declared as capital assets prior to GST and used by the appellant for providing output services. Thereby they had no tax liability under the erstwhile KVAT law. Further, they squarely fall under the definition of “Capital Goods” under Section 2(19) of the KSGST Act, 2017 and not under Section 2(59) of the KSGST Act 2017. Hence the relevant transitional provision applicable in the instant case is Section 140(2) of the KSGST Act 2017 and Section 140(3) of the KSGST Act cannot be invoked.

vi) As per section 140(2) of the KSGST Act 2017, a registered person other than a person opting to pay under Section 10, shall be entitled to take, in his electronic credit ledger credit of un-availed input tax credit in respect of capital goods not carried forward in a return furnished under the existing law by him for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed. Proviso to the said sub-section of the Kerala SGST Act stipulates that the 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 the Act.

vii) The appellant being a service provider, had no tax liability under the erstwhile KVAT Act , and thereby was not eligible to avail input tax credit on computers and laptops held during the transition period. Hence the transitional input tax credit claim of the Taxpayer in respect of capital goods is not admissible as per the transitional provisions of the KSGST Act 2017.

viii) In view of the above discussions this Appellate Authority for Advance ruling does not find reason to modify the decision of the Authority for Advance Ruling, issued vide paper read 1st above. Accordingly the following orders are issued.

ORDER No. AAR/05/2018 DATED 14.12.2018

The computers, laptops etc. used by the appellant for providing output service would not qualify as inputs, though they are physically available as on 30th June 2017 for the purpose of availing transitional input tax credit of the VAT paid during the pre-GST period) under Section 140 of the KSGST Act 2017. Therefore the appeal is disallowed.

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