GST refund on capital goods: how to report an inverter or laptop

Exclude capital-goods credit from Net ITC when calculating an accumulated-credit refund on exports under LUT. The credit may still be eligible for ordinary use. Record that eligibility decision and the refund exclusion separately.

Rule 89(4)(B) includes credit on inputs and input services in Net ITC. It does not include capital goods. This guide concerns that export-without-payment route. CGST Rule 89(4), read with Notification 20/2024, clause 9.

Proposed change (checked 22 October 2026): the GST Council has recommended including eligible capital-goods ITC availed on or after 1 April 2027 in Net ITC, at one-sixtieth for each month. It applies only after rule 89 is amended; until then, exclude the credit as this guide describes. See capital-goods credit from April 2027.

Check the asset’s accounting treatment

Check how the goods are properly accounted for. The GST definition refers to goods whose value is capitalised in the claimant’s books and which are used or intended for business. An equipment description or high purchase price alone does not settle the classification.

An inverter and battery capitalised as a business power-backup asset are the capital-goods scenario here. A repair service or consumable properly charged to expenses needs its own classification. CBIC specifically distinguishes capitalised goods from stores and spares charged as revenue expenditure. Do not change the accounting treatment merely to increase a refund. Circular 125/44/2019-GST, paragraph 62.

Before treating any equipment credit as eligible, also check business use, the original tax invoice, receipt of the goods, applicable return conditions, blocked-credit provisions and reversals. If income-tax depreciation is claimed on the GST component, section 16(3) prevents ITC on that same component. CGST Act, section 16.

Example: ₹9,000 of asset credit stays outside the refund

All amounts and parties in this example are invented. Assume a capitalised business inverter system costs ₹50,000 before GST, with ₹9,000 tax shown on the invoice. The rate is an assumption for the arithmetic, not a classification ruling for every inverter or battery.

The business also avails ₹27,000 eligible ITC on advertising and other input services in the claim period. There are no blocked amounts or other reversals.

Credit source	Eligible ordinary ITC	Included in Rule 89(4) Net ITC
Input services	₹27,000	₹27,000
Capitalised inverter system	₹9,000	₹0
Total	₹36,000	₹27,000

The refund computation starts from ₹27,000, then applies the export-turnover proportion and ledger limits. It does not start from ₹36,000.

Should I still show the asset in Annexure B?

Yes, disclose the asset invoices supporting ITC availed for the period and classify them as Capital Goods. Keep the exclusion visible in the bridge from Annexure B to refund Net ITC. Paragraph 36 of Circular 125 calls for the invoice details supporting period ITC; the current utility provides a separate Capital Goods category. Circular 125, paragraph 36, GST portal: Annexure B fields.

For the fully eligible asset in this example:

Field or working	Treatment
Type of inward supply	Inward Supplies from Registered Persons, assuming that is the actual purchase
Category of input supplies	Capital Goods
Whether ITC blocked under section 17(5)	No, under the example’s eligibility assumptions
Eligible for ITC	Yes
Amount of eligible ITC	₹9,000
Amount of ineligible ITC	₹0
Separate refund-computation exclusion	₹9,000 excluded from Rule 89(4) Net ITC

Do not select “blocked” merely because capital-goods credit is excluded from this refund. If the asset is partly for personal use or another restriction applies, determine the actual eligible amount and necessary reversal separately.

An invoice with an inverter and battery under different HSN codes needs separate rows with the appropriate allocated values and taxes. The Annexure B worked example shows the split without duplicating the invoice total.

What if the portal shows the larger ITC total?

Reconcile the utility summary to the legal refund calculation. The current RFD-01 manual says Net ITC in the computation is auto-populated and can be reduced. If it includes capital-goods credit or another non-refundable amount, reduce it to the supported Net ITC and attach the calculation explaining the difference. GST portal: Statement 3A computation.

Keep the asset invoice, the capitalisation and eligibility working, and the ₹36,000-to-₹27,000 reconciliation together. Excluding ₹9,000 from this refund is not by itself an instruction to reverse otherwise eligible credit out of GSTR-3B. Its later utilisation remains subject to the normal credit rules.

Continue to the refund calculation example to apply turnover and both credit-ledger limits to the ₹27,000 figure.