GST on Sale of Fixed Assets

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anitabhadra

Fixed assets are the assets or things purchased for a long-term purpose. In GST law, the
term ‘Capital Goods’ is used for such fixed assets. As per section 2(19) of CGST Act,
Capital goods mean 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.

This article covers following relevant points related to GST Applicability & Treatment of
ITC availed on sale of Fixed Assets:- GST Applicability on Sale of Capital Goods purchased
in Pre GST era, Treatment on Sale of Capital Goods purchased after implementation of
GST, Liability on sale of Capital Assets on which Input Tax Credit (ITC) is not availed,
How to deal with loss/damage of assets where no consideration is received? and Tax
treatment on sale/disposal of capital goods in case when ITC is availed.

Chart on Applicability of GST on sale of Fixed Assets under

different condition

Sl Assets ITC availed / Assets disposed Consideration GST

purchased Not availed of intentionally/ received / not Applicable
in Pre GST / at the time Unintentionally received on / Not
Post GST of purchase (Refer Note 1) sale of Asset Applicable
Era

(a) Pre GST Not Availed Unintentionally No Not

Applicable

(b) Post GST Not Availed Unintentionally No Not

Applicable

(c) Post GST Not Availed Intentionally No (Refer Note Not

2) Applicable

(d) Post GST Availed Unintentionally No Applicable

(Refer
Note 3)

(e) Pre GST Availed Unintentionally No Applicable

(Refer
Note 3)
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 (f) Post GST Availed Unintentionally No Applicable
(Refer
Note 3)

(g) Post GST Availed Intentionally Yes Applicable

Note 1:- Unintentional disposal means loss or damage of assets due to reasons such as
accident, fire, natural calamity, theft etc, whereas sale or transfer of assets are
considered as intentional disposal of Fixed Assets

Note 2:- The case where no consideration is involved must be discussed in the light of
the amendment to the definition of Supply (Section 7 of the Act) made by the CGST
Amendment Act, 2018. Before the amendment, if any transfer of capital assets was
made under the direction of the person,(intentional transfer) the transaction was a
supply under the provision of the Act, whether or not consideration was involved.

However, after the amendment, the requirement of consideration is a must. Therefore, it

would be right to conclude that where no ITC has been availed, the transfer of capital
goods without consideration shall not be a supply and hence no GST should be
chargeable.

Note 3 In case of unintentional disposal such as Damage/Lost Assets, Theft, ITC availed
need to be reversed and will have to be paid as output tax liability.

Valuation & determination of Tax payable:- As per sec 18(6) of CGST Act, the taxable
amount will be:- an amount equal to Input tax credit attributable to remaining useful life OR
the tax on the transaction value of such capital goods determined under section 15,
whichever is higher

Example

Mr. X purchased Fixed Asset on 1 st June 2015 (Pre GST), Even if he purchased the same
Asset in Post GST Era, the methodology to calculate the taxable amount will remain the
same.

(a) Purchase Rs 50000/-

value

(b) Taxes Rs. 9000/-

Paid (VAT/
GST)

(c) ITC availed Rs 9000/-

(d) Date of 1st Jan 2020

Goods Sold
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 (e) Date of 1st Jan 2020
Goods Sold

(f) Goods 55 months

used for

(g) Remaining 5 months (As per CGST Rule 44(6), useful life of the asset will be
useful life taken as 5 years to calculate ITC reversal on fixed Assets)

(h) Sale Rs. 4000

consideration

(i) GST @ 18% Rs. 720

on Sale

Calculation of taxable amount:-

Input tax credit attributable to the remaining useful life:-

(c*f/ 60) = 9000*5/60 = Rs 750

OR

Tax on the transaction value of such Fixed Asset

4000*18% = Rs 720/-

Rs 750/- being higher of the two will be added as taxable value.

Invoicing and reporting in GSTR 1 when ITC attributable to remaining useful life is
higher:-

ITC availed for remaining useful life of Fixed Assets amounting to Rs 750 /- need to be
added as tax liability and reported in GSTR 1. However taxable value to be reported in
invoice and GSTR 1 will be Rs. 4167. (750/18%=4167)

Invoice No……… Dt……..

Taxable Value (Outward Taxable supply) Rs 4167.00

GST @ 18% on Rs 4167 Rs. 750.00

Invoicing and reporting in GSTR 1 when Tax on transaction value is higher

In such cases tax invoice has to be prepared and actual consideration will be the taxable
value. Same has to be reported in GSTR 1. In the example given above, if sale value is Rs
5000/- and tax on transaction value is (5000*18%=900) higher than ITC attributable to
remaining useful life ie Rs 750/-, Invoice will be prepared for (5000+900) 5900 /- and
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same is to be reported in GSTR 1

Outward Liability in case of Damage /Loss of those assets for which ITC has been
availed

In case of unintentional transactions, such as Damage/Lost Assets, Theft, etc. tax on

transactional value cannot be determined as there will not be any transaction value of
damaged, lost capital goods Therefore amount towards ITC attributable on remaining
useful life ie Rs 750 /- will have to be added as output tax liability.

The amount shall be determined separately for an input tax credit of central tax, State tax,
Union territory tax, and integrated tax

Margin Scheme for valuation of capital goods

the margin scheme is applicable for a dealer other than a person dealing in second-hand
goods, only in the case of motor vehicles, that too only if input tax credit has not been
claimed.

The scheme is made applicable to all taxpayers on the sale of the motor vehicle held as a
capital asset. Vide Notification No. 8/2018 – Central Tax (Rate) dated 25 Jan 2018. In
this regard, GST has to be paid on the excess of selling price over the written down value
as per the Income Tax Act, 1961, where depreciation has been claimed by the taxpayer.
Where no depreciation has been claimed, GST shall be paid on the difference in the
selling price and the purchase price.

The author can be accessed at caanitabhadra@gmail.com

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