What are the cases of Non-Availability of ITC? Explain.
What are the cases of Non-Availability of ITC? Explain.
Or
What are Blocked Credits? Discuss.
Ans.
Blocked Credits
(Cases of Non-Availability of ITC) [Sec. 17(5)1
ITC of tax paid on almost every inputs and input services used for supply of taxable goods or services or both is allowed under GST except a small list of items provided u/s 17(5). The negative list covers mainly items of personal consumption, puts use of which results into formation of an immovable property (except plant and machinery), telecommunication towers, pipelines laid outside the factory premises, etc. and taxes paid as a result of detection of evasion of taxes. The detailed list is given hereunder:
(1) Motor vehicles and conveyances, except when used
(i) For transportation of goods;
(ii) For making the following taxable supplies:
(a) Further supply of such vehicles of conveyances; or
(b) Transportation of passengers; or
(c) Imparting training on driving, flying, navigating such vehicles or conveyances.
A car dealer is allowed ITC on cars purchased for resale; a cab service is allowed ITC on cars purchased for use as cabs; a driving school is allowed ITC on cars purchased for use in teaching driving.
(2) Foods and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, except when used
(i) An inward supply of these is used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply.
Example. A caterer for a wedding gets the sweet dish course supplied by a specialist in desserts. He is allowed ITC of the tax paid by him to the specialist.
(3) Membership of a club, health and fitness centre.
(4) Rent-a-cab, life insurance and health insurance, EXCEPT WHERE
(i) The Government has made it obligatory for an employer to provide any of these services to its employee; or
(ii) Inward supply of these services is used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply.
(5) Travel benefits to employees on vacation such as LTC or home travel concessions.
(6) Works contract services for construction of an immovable property except when
(i) It is input service for the further supply of works contract service;
(ii) Immovable property is plant and machinery.
(7) Inward supplies received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account even when such supplies are used in the course or furtherance of business.
Example. A company buys material and hires a contractor to construct an office building to house the plant supervisory staff. The input tax paid on such goods and services is not allowed as a credit.
Meaning of Construction and Plant & Machinery
“Construction”, both in this clause and the previous one, includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property,
“Plant and machinery” means apparatus, equipment, and machinery fixed to earth by a foundation or structural supports but excludes land, building or other civil structures, telecommunication towers and pipelines laid outside the factory premises.
(8) Inward supplies on which tax has been paid under the composition scheme.
(9) Inward supplies received by a non-resident taxable person except goods imported by him.
(10) Goods and/or services used for personal consumption.
(11) Goods that are lost, stolen, destroyed, written off or disposed off by way of gift or free samples.
(12) Tax paid as a result of evasion of taxes, or upon detention of goods or conveyances in transit, or towards redemption of confiscated goods/conveyances.
