In this post, we discuss Sale of Capital Goods under GST Entries in Tally. Capital goods are those assets of a business which are used in manufacturing process. It mainly used in the production process of a company. Businesses purchase capital goods with the objective that not sell out in future. After GST implementation in India, what will be the accounting treatment when someone wants to sell its capital goods. We explain how to post accounting entries for capital goods in Tally ERP 9. Sale of Capital Goods under GST Entries in Tally.
Sale of Capital Goods under GST-
To get detail information, you may refer following GST act-
- Schedule II CGST Act, Para 4 (a)
- Schedule I CGST Act, Para 1
- Section 18 (6) of CGST Act
- Rule 44 CGST Rules
Valuation of Tax payable on Capital Goods:
Where ITC has been availed on Capital Goods:
Section 18 (6) of CGST Act:-
In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery determined under section 15, whichever is higher.
Assume that capital goods used for 4 Yrs. and 7 Months, so balance life = 5 months
Purchase Cost of Machinery = 50,000/- @ 18% GST i.e. 9,000/- so Total Cost =59,000/-
Calculate ITC of balance useful life = 9000 x 5/60 = 750/- (Amount)
formula = ITC x Balance Useful Life / 60 Months
Lets Assume actual sale value is Rs. 4000/-
Tax Calculation = 4000 x 18% = Rs. 720/- (Tax)
so Amount > Tax that is 750 > 720
and as per GST act If Amount > Tax = Amount is to be paid, and same shall be treated as Output tax liability. This will have to be reported in GSTR 1.
Sale of Capital Goods under GST Entries in Tally
Enable GST in Tally- Press F11 at Gateway of tally > statutory and Taxation Features
- Machinery Sales A/C Under Sales Group > GST Applicable Yes > Set Get Detail
- Sundry Debtor A/c Under Sundry Debtor Group
- In Sales Voucher Press F8- Change sales Voucher mode using CTRL + V
Debtor A/C Dr.
To Machinery Sales A/C
To CGST/ SGST/ IGST
- Press Alt+P to Print GST Tax Invoice
- To Decrease value of capital goods or fixed assets in balance sheet go to journal voucher or press F7 and post following entry-
Machinery Sales A/c Dr.
To Respective Asset A/C
I have also created this video tutorial to explain how to pass capital goods or fixed assets sales entries under gst in tally. Let’s see these steps in action using our video-