February 20, 2023

GST Compliance on Sale of Capital Goods: Key Aspects to Consider

Indian Small and Medium Businesses (SMBs) and startup founders have been facing a lot of challenges in understanding the Goods and Services Tax (GST) compliance on the sale of capital goods. In this article, we will discuss the key aspects of GST compliance in the sale of capital goods, how to calculate the GST, and the documentation required for GST compliance.

What are Capital Goods?

Capital goods are those goods that are used by businesses for generating income. They can be tangible or intangible assets that are intended to be used in the long term. Examples of capital goods include machinery, vehicles, office equipment, and buildings.

How is GST Calculated on Sale of Capital Goods?

When a business sells a capital good, they need to consider the value of the good and the rate of GST applicable to the good. The rate of GST on capital goods is either 5% or 18%, depending on the type of capital good. It's important to note that the GST is charged on the value of the capital good after deducting any input tax credit that the business has.

What Documentation is Required for GST Compliance on Sale of Capital Goods?

When selling a capital good, businesses need to generate an invoice that includes the following information:

  • Details of the buyer and seller
  • Description of the capital good being sold
  • Value of the capital good
  • Rate of GST applicable
  • Total amount of GST charged

Businesses also need to file a GST returns form, which includes details of all the sales made during the period. It's important to maintain accurate records of all sales made, as well as any input tax credit claimed, to ensure compliance with GST regulations.

Impact of GST on Sale of Capital Goods

Since the introduction of GST, businesses have been required to comply with complex regulations and procedures for the sale of capital goods. Failure to comply with these regulations can lead to penalties and fines. However, complying with GST regulations can also lead to a number of benefits for businesses, including increased transparency and efficiency in the tax system.


Compliance with GST regulations on the sale of capital goods can be a daunting task for Indian SMBs and startup founders. However, by understanding the key aspects of GST compliance, including how to calculate the GST, and the documentation required, businesses can ensure that they remain compliant with GST regulations and avoid any penalties or fines.


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