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Treatment of Capital Goods not eligible for ITC

1.      VAT Class 'Capital Goods not eligible for ITC' should be attached with Fixed Asset account.

2.      VAT Class 'Reversal of ITC - Capital Goods' should also be attached with Fixed Asset account.

3.      Entry should be passed as under: -

  
A/c Head
V.Class
Debit
Credit
Machinery A/c
(Capital Goods not eligible for ITC)
10,000.00
 
Machinery A/c
(Reversal of ITC - Capital Goods)
400.00
 
Party A/c
 
 
10,400.00


In form VAT-24, purchase will be shown as 10,000.00 and ITC will be shown as 400.00.

In form VAT-15, ITC available will be shown as 400.00. However this will be reduced by the same amount in 'Reversal of ITC' column. Thus the actual ITC shall be NIL.