Answer

1. F

   Facts

   Capital goods held on the cancellation date are also covered by Sec 29(5). For capital goods the ITC is reduced by percentage points for the time used, as Rule 44 lays down. The balance, or the tax on their transaction value, whichever is higher, is payable.

2. P

   Provisions and law

   • Sec 29(5), CGST Act 2017On cancellation you pay the higher of ITC on stock and capital goods held, or output tax on them
   • Rule 44, CGST Rules 2017Manner of reversal of ITC on capital goods and stock on cancellation, credit reduced by 5 percentage points per quarter of use
3. A

   Analysis

   Rule 44 reduces capital goods ITC by 5 percentage points for every quarter or part of it since the invoice date. A machine bought 2 years ago (8 quarters) with ITC of ₹1,80,000 has 40 percentage points used, so ₹1,08,000 of credit is attributable to the remaining life. If you instead sell the machine, Sec 18(6) needs tax on the sale value or the reduced credit, whichever is higher. Compare this with the output tax on the machine's transaction value and pay the higher figure.

4. C

   Conclusion

   1. 1List capital goods with invoice date and ITC taken.
   2. 2Count the quarters used and apply Rule 44 to find the remaining credit.
   3. 3Compare with tax on current transaction value.
   4. 4Report the higher amount in REG-16 and pay in GSTR-10.

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