Cases where GST Credit Not Available


Cases where GST Credit Not Available

Today we shall discuss situations/transactions where Input Tax Credit under GST cannot be availed.  This is a very important aspect one needs to know as incorrect recording or GST transactions can have serious repercussions.  So we have tried to simply what transactions are a NO for claiming input tax credit (ITC) under GST rules:

1.     Motor vehicles & conveyances
ITC is not available for motor vehicles and conveyances.

Exceptions to ITC on motor vehicles when they are used for:

a.)   Supply of other vehicles or conveyances.  If you are in the business of supplying cars then ITC will be available.  So automobile dealers can claim ITC.

b.)   Transportation of Passengers.  So if you are providing transportation of passengers then ITC will be allowed on the Vehicle purchased and used for such transport.  Hence, all businesses running Passenger bus transport can claim ITC.

c.)   Imparting training on driving, flying, navigating such vehicle or conveyances.  Thereby, car purchased by business running driving schools can claim ITC on car purchase.

d.)   Transportation of goods.  ITC will be allowed on motor vehicles (and other conveyances) used to transport goods from one place to another. However, this is concerning other transporters and not Goods Transport Agencies (GTA).

2.     Food, Beverages, Club memberships and others.  ITC is not for the supply of following goods or services or both: Food and beverages, Outdoor catering, Beauty treatment, Health services, Cosmetic and plastic surgery

However, ITC will be available if the category of inward and outward supply is same or the component belongs to a mixed or composite supply under GST.

3.     Sale of membership in a club, health, fitness centre.  No ITC will be allowed on any membership fees for gyms, clubs etc.

4.     Rent-a-Cab, Life Insurance, Health Insurance.  ITC is not available for rent-a-cab, health insurance and life insurance purchased.

However, the following are exceptions, i.e., ITC is available for-

a.)   Any services which are made obligatory for an employer to provide its employee by the Indian Government under any current law in force.  For instance, all business working night shift required to provide rented cabs to female staff.

b.)   If the category is same for the inward supply and outward supply or it is a part of the mixed or composite supply.  So if two travel operators rent buses between each other they can claim ITC.

5.     Travel.  ITC is not available in the case of travel, benefits extended to employees on vacation such as leave or home travel concession.  ITC will however be allowed for travel for business purposes particularly on airfare or rail fare.

6.     Works contract.  ITC shall not be available for any work contract services. ITC for the construction of an immovable property cannot be availed, except where the input service is used for further work contract services.

7.     Constructing an immovable property on own account.  No ITC is available for goods/services for construction of an immovable property on one’s own account. Even if such goods/services are used in the course or furtherance of business, ITC will not be available.  But this rule does not apply to plant or machinery. ITC is available on inputs used to manufacture plant and machinery for own use.

8.     Composition Scheme.  No ITC would be available to the person who has made the payment of tax under composition scheme in GST law.

9.     No ITC for Non-residents.  ITC cannot be availed on goods/services received by a non-resident taxable person. ITC is only available on any goods imported by him.

10.  No ITC for personal use.  No ITC will be available for the goods/ services used for personal purpose and not for business purposes.

11.  Free samples and destroyed goods.  No ITC is available for goods lost, stolen, destroyed, written off or given off as gift or free samples.

12.  No ITC in fraud cases.  ITC will not be available for any tax paid due to fraud cases which has resulted into – Non or short tax payment or Excessive refund or ITC utilised or Fraud cases include fraud or wilful misstatements or suppression of facts or confiscation and seizure of goods.

13.  No ITC on restaurants.  Standalone restaurants will charge only 5% GST but cannot enjoy any ITC on the inputs.  However, restaurants as part of hotels with room tariffs exceeding Rs. 7,500 still can continue pay 18% GST and enjoy ITC.

For any queries, feel free to write to us at info@gjmco.in

Thanks & Best regards,
Knowledge Base Team
GJM & Co.
Chartered Accountants
www.gjmco.in





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