Hi I am civil contractor. I have purchased poclain machine on 16.08.19 of Rs 5288000 ( Assessable Amt Rs 4481356 + CGST RS 403322 + SGST RS 403322). I have claimed ITC of such machine. Now I have to sale such machine for Rs of 4550000( Assessable Amt 3855932+ CGST 347033+ SGST 347033). Probable sale date will be 11.10.20. Normal life of such machine is 5 years. So I have following questions : 1) is 5 years normal life for poclain machine is right? 2) what will be the invoice amount of resale transaction ? CGST & SGST should be shown separately in invoice? 3) I will have to reverse any GST ? How many ? 4) Shall I use ITC credit for GST payable of resale transaction ? Please clarify above points. Thanks

Reply—The seller is required to charge GST on sale of machine as per below provisions.

Section 18(6) of CGST Act, contains provisions of Sale of capital goods on which ITC has been taken. The registered person shall pay an amount equal to—

1) ITC taken on such Capital goods reduced by such percentage points as may be prescribed (Rule 44(6) of CGST Act); or

2) Tax on transaction of such Capital goods determined u/s 15, whichever is higher.

As per rule 44 (6) amounts of input tax credit involved in Capital goods held in stock, the Input tax credit involved in the remaining useful life in months shall be computed on prorata basis, taking the useful life as five years. Further if the amount so determined is more than the tax determined on the transaction value of the Capital goods, the amount determined shall from part of the output tax liability and the same shall be furnished in FORM GSTR-1.

GST will be applicable at same rate as new machinery.

For Example—
Cost of capital goods—Rs. 1,00,000 + GST 18% (18,000) 
Used for 4 year 7 months
ITC of balance life of capital goods—  Rs. 1500/-    (18000 x 5/60)
Assume sale consideration for old asset is Rs. 8,000/- +GST 18% (1440/-)

As Rs. 1500/- is greater than Rs. 1440/-, Therefore Rs. 1500/- is payable and has to be reported in GSTR 1. Tax Invoice has to be prepared in this case with Invoice value as Rs.9,500/-. And taxable value to be reported in invoice and GSTR 1 will be Rs. 8,334 (9500/15x100).