ITC on Purchase of Capital Goods in TallyPrime: 5 Easy Steps

When a business purchases capital goods, like machinery or equipment, it can claim Input Tax Credit (ITC) on the GST paid for those purchases.

This helps reduce the GST liability on outward supplies.

TallyPrime makes it easy to record the purchase of capital goods and avail the ITC, while also ensuring accurate GST return reporting.

Let’s understand this with step-by-step guidance and practical examples.

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1. What Are Capital Goods?

Capital goods are assets used in the production or supply of goods or services and not meant for resale. Examples include:

• Computers
• Machinery
• Office furniture
• Equipment

If you use these assets for business purposes, you’re eligible to claim ITC on the GST paid.

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2. When Can You Claim ITC on Capital Goods in TallyPrime?

You can avail ITC if:

• The capital goods are used for taxable business activities
• The invoice is available
• GST has been paid to the supplier
• The supplier has uploaded the invoice in their GSTR-1

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3. Step-by-Step: Record Purchase of Capital Goods and Avail ITC in TallyPrime

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Step 1: Enable GST in TallyPrime

1. Go to F11 (Features) > Statutory & Taxation
2. Enable Goods and Services Tax (GST) – Set to Yes
3. Set the State and GST Registration Type

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Step 2: Create Ledger for Capital Goods Purchase

1. Go to Gateway of Tally > Accounts Info > Ledgers > Create
2. Name: Machinery Purchase
3. Under: Fixed Assets
4. GST Applicable: Yes
5. Set Nature of Transaction: Purchase Taxable
6. GST Rate: Example – 18%

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Step 3: Create Supplier Ledger

1. Name: ABC Machinery Ltd.
2. Under: Sundry Creditors
3. Set GST Registration Type as Regular
4. Enter GSTIN, state, and relevant details

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Step 4: Create GST Ledgers

• CGST @ 9%, SGST @ 9% (for local purchases)
• Or IGST @ 18% (for interstate purchases)
• Under: Duties & Taxes
• Type of Duty/Tax: GST

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Step 5: Record the Purchase Voucher

1. Go to Accounting Vouchers > F9: Purchase
2. Select the supplier: ABC Machinery Ltd.
3. Enter invoice number, date, and purchase details
4. Under Particulars, select:
   • Machinery Purchase – ₹1,00,000
   • CGST – ₹9,000
   • SGST – ₹9,000
5. Total invoice amount: ₹1,18,000

TallyPrime will automatically treat this as a purchase of capital goods, and show the GST as ITC.

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4. Example: ITC on Purchase of Capital Goods in TallyPrime

Let’s say your business purchases a printing machine for ₹2,00,000 from a local supplier, and GST @ 18% is applicable.

• CGST: ₹18,000
• SGST: ₹18,000
• Total: ₹2,36,000

TallyPrime records this entry and the ₹36,000 becomes eligible ITC, which will appear under:

• GSTR-3B > ITC Available > Capital Goods
• GSTR-2B matching (if connected to portal)

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5. Where Can You See the ITC on Capital Goods in TallyPrime?

Go to:

• Gateway of Tally > Display More Reports > Statutory Reports > GST > GSTR-3B
• You will see the capital goods ITC reflected under Eligible ITC – Capital Goods

This helps in reporting the correct figures during GST filing.

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6. Benefits of Recording Capital Goods Purchase with ITC in TallyPrime

• Reduces your tax liability
• Maintains accurate records for audits
• Ensures compliance with GST rules
• Smooth reconciliation with GST portal (if connected)

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7. Conclusion

Recording capital goods purchases and availing ITC in TallyPrime is simple and compliant with GST laws.

By correctly classifying the purchase under fixed assets, and applying the right GST, you can ensure maximum input credit is claimed while keeping your records audit-ready.

Always make sure to cross-check the supplier’s GSTR-1 filing for smooth matching of ITC in your GSTR-2B or GSTR-3B.