Supply of capital goods on which input tax credit is taken:
The registered person shall pay an amount equal to the higher of:
o Input tax credit taken on such capital goods as reduced by such prescribed percentage points or
o the tax on the transaction value of such capital goods, One striking difference becomes evident in Rule 40 in the manner of computation of ITC in respect of used capital goods under sub rule (1a) and sub rule (2). While sub rule (1a) deals with availment of input tax credit on capital goods after reducing “five percentage points per quarter of a year or part thereof”, sub rule (2) specifies computation of input tax credit by reducing ” five percentage points for every quarter or part thereof from the date of the issue of the invoice”.
From the above we may come to the following conclusion:
For the purpose of sub-rule (1a), quarter shall mean a ‘calendar quarter’
For the purpose of sub-rule (2), the quarter shall be computed from the date on the invoice.
For example: a capital good purchased on 25th March, 2018 would be reduced by 5 percentage points for the quarter ending March 2018 for the purpose of sub-rule (1a) while the same assets would be reduced by 5 percentage points for the period ranging between 25.03.2018 to 24.06.2018 and so on.