“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 term “input” refers to goods as defined under the GST law, and excludes capital goods. Unlike the definitions given to the term “capital goods” in the erstwhile laws such as Central Excise, VAT, etc., the term is given a very simple meaning in the GST law.
It is sufficient for any goods which are used or intended for use in the course or furtherance of business to be capitalised in the books of account, for them to be treated as capital goods under GST. Accordingly, if a person who is engaged in the sale of laptops capitalises one laptop in his books of account, and such laptop is for business-use, (say for invoicing purposes), that laptop shall be treated as capital goods under GST law as well.
The second condition for goods to be treated as inputs, is that they must be used or intended to be used by the person who has inwarded (say by way of purchase, exchange, etc.) those goods ‘in the course or furtherance of business’. This phrase encompasses a wide range of functions within the business.
The term “business” as defined under the GST law includes any activity or transaction which may be connected, or incidental or ancillary to the trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity.
There is neither a requirement of continuity nor frequency of such activities or transactions for them to be regarded as ‘business’.
The law poses no restriction that the goods must be used on the shop floor, or that they must be supplied as such/ as part of other goods/ services. It would be sufficient if the goods are used in the course of business, of for furthering the business.
The term ‘course of business’ is one that can be stretched beyond the boundaries consolidating activities that have direct nexus to outward supply. What is usually done in the ordinary routine of a business by its management is said to be done in the
“course of business”. Moreover, the term “ordinary” is missing before “course” in the phrase.
From the above, it can be inferred that the purchase/ inward supply of goods need not be a regular activity, and may even be a one-time procurement. This is further clarified with the other phrase “furtherance of business”, which has not been of use in the indirect taxes thus far.
“Furtherance of business” is a new term, and an entirely new concept, that has been introduced with GST.
Additionally, there is no other condition attached to the term “input”, especially in relation to the outward supply. Consequently, a person engaged in supplying services would also be entitled to treat the goods inwarded as “inputs”, where the conditions of not being capital goods, and the usage in the course or furtherance of business, Thus, laptops procured by a supplier of pure services which are meant for use of the employees for business making reports, will be eligible to be treated as “inputs” for such a person, and consequently, the taxes paid on such goods will be available as credit to the service provider, on meeting other conditions mandated for claiming credit.
Further, the law provides a flexibility for this purpose by inserting the words “or intended to be used” before “in the course…”. By this, the law secures the meaning of the term “input” even for cases where goods have been purchased but, are yet to be used in the business. Thus, the conditions of ready-to-use and put-to-use would not be relevant for considering goods as“inputs”, unless the condition takes route through rules/ other sections. However, no such conditions appear even for claiming input tax credit.