Capital Goods ITC Amortisation Schedule (60-Month Rule 43 Calculator)

Section 2(19) of the CGST Act defines capital goods as goods whose value is capitalised in the books of account and which are used in the course or furtherance of business. Section 16 permits a registered manufacturer to claim the full ITC on capital goods in the year of receipt, subject to the standard conditions (tax invoice held, goods received, supplier has paid tax, invoice appears in GSTR-2B, no Section 17(5) block). There is no requirement to spread the credit over the asset's useful life on the initial claim.

Under Section 18(6) read with Rule 44 of the CGST Rules, when a capital asset on which ITC was claimed is later sold, the manufacturer must reverse a portion of the originally claimed ITC. The reversal is the original ITC reduced by five percentage points for every quarter (or part thereof) of use, against a notional useful life of 60 months. If the GST on the actual sale consideration exceeds the reversal amount, the higher figure becomes the GST liability on the disposal. The reversal mechanic effectively amortises the credit over 60 months, retaining 1/60th per month of use.

Section 17(5) of the CGST Act blocks ITC on specified categories regardless of business use. The manufacturing-relevant blocks include motor vehicles for transport of persons with seating capacity up to 13 (with use-based exceptions), vessels and aircraft, works contract services for construction of immovable property (other than plant and machinery), goods or services for personal consumption, club and gym memberships, life and health insurance (except where statutorily mandated), and goods lost, stolen, destroyed or written off. ITC claimed on a blocked credit and not reversed by September of the following year attracts 18% interest under Section 50.

Reversal triggers include sale or disposal of the capital asset, transfer to a different GSTIN, use of the asset for exempt supplies or non-business purposes, write-off due to loss, theft or destruction, and supply as a gift or free sample. In each case the originally claimed ITC must be retrieved, the months of use computed from the date of the original invoice, and the reversal calculated at 5% per quarter of remaining life. The retainable ITC is the original credit minus the reversal.

Yes — input services used in the course or furtherance of business are claimable as ITC in the month the invoice appears in GSTR-2B, subject to Section 17(5) blocks (works contract services for construction of immovable property other than plant and machinery are blocked, for example). Input services on capital projects are claimed monthly as the invoices flow in; in the books, the cost may sit in CWIP until commissioning. The reconciliation must therefore tie three surfaces continuously: GSTR-2B inward CG entries, the CWIP ledger, and the fixed asset register.