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Section 18(1)(c) — switch from COMPOSITION to REGULAR — taxpayer is entitled to take ITC on:
A100% of all past purchases
BCapital goods only
COnly future inputs
DInputs held in stock and inputs in semi-finished/finished goods + capital goods (reduced by 5%/qtr), on the day preceding switch
Answer & Solution
Correct answer: D. Inputs held in stock and inputs in semi-finished/finished goods + capital goods (reduced by 5%/qtr), on the day preceding switch
1. Sec 18(1)(c) — registered person ceases to pay composition tax (and starts paying regular) can take ITC on:
2. (i) Inputs held in stock and inputs in semi-finished/finished goods on the day preceding switch, AND
3. (ii) Capital goods, reduced by 5 percentage points per quarter from date of invoice or such other percentage prescribed.
_Source: ICAI BoS CA Final Paper 8, Ch 6 "Input Tax Credit", §Sec 18(1)(c)_
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