Blocked credit under section 17(5) of CGST Act 2017 relates to supply of goods/ service involved, insurance of motor vehicle including motorcycle, cost of motor vehicle, servicing of motor vehicle, life insurance/ health insurance of worker and office staff, food and beverages, works contract service and goods and service for construction of an immovable property,
Although the government promised the free flow of credit during the implementation of GST, there are some goods & services where you cannot claim Input Tax Credit (hereinafter referred to as “ITC”) though you have already paid for it.
Following are the cases where you cannot claim ITC:
Motor vehicles, vessels & aircraft ITC is not accessible for motor vehicles used for personal transportation with a seating capacity of less than or equal to 13 (Including driver). Additionally, ITC is not available for vessels & aircraft subject to certain exceptions:
If it is used for making such taxable supply of such vehicles or conveyance, vessels or aircrafts
Making taxable supply of transportation of passengers
Making taxable supply of imparting training on driving, flying, navigating etc.
Further, if it is used to transport goods from one place to another, ITC is allowed.
General insurance, servicing, repair and maintenance ITC is not allowed on services of general insurance, servicing, repair and maintenance as they relate to motor vehicles, vessels & aircraft subject to certain exceptions:
Same exception as of Motor vehicle, vessels & aircraft
Received by a taxable person engaged in:
Manufacturing of motor vehicles, vessels or aircraft
In the supply of general insurance services in respect to such motor vehicles, vessels, or aircraft assured him.
Food, beverages, Outdoor catering and others ITC cannot be availed on following goods or services such as food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery.Provided that ITC is available in respect of such goods or services or both shall be obtainable where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same classified of goods or services or both or as an segment of a taxable compounded or mixed supply.
Travel ITC is not available in case of travel benefits extended to employees on vacation, such as leave or home travel concession.
Works contract services ITC is not available on any work contract services when supplied for construction of an immovable property (other than plant and machinery), excluding an input service for further supply of works contract service.
Constructing an immovable property on its account ITC is not available on constructing an immovable property on its own account (other than plant and machinery), including when such goods or services or both are used in the course or furtherance of business.
Composition scheme under GST (Section 10) No ITC can be claimed if the person made the payment of tax under the composition scheme in GST law
Non-resident No ITC can be claimed if a non-resident person receives the goods or services or both except on goods imported by him
Personal use/Consumption No ITC can be claimed if the goods or services or both are used for personal consumption
Free samples, destroyed goods, lost goods and gifts No ITC can be claimed on goods lost, stolen, destroyed, written off or disposed of by way of gifts or free samples
Section 74, 129, 130 No ITC can be claimed if any tax is paid according to sections 74, 129, 130. In such cases, the tax was not paid to eluded tax the ITC. Therefore it has been restrained to penalize such assesses.
Goods written off in the books of account either as raw material, semi-finished goods or finished goods, then ITC of inputs and input services used for manufacturing is not accessible. Further, ITC needs to be reversed when goods are written off in the books of accounts.
At AJSH, we assist our clients with various GST matters (GST registration, GST advisory, GST assessments, filing of GST returns, claiming GST audits) by providing them with adequate support and guidance from our end. If you have any questions or would like to know more about blocked credit 17(5), kindly contact us.
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