Eligible ITC, Apportioned ITC & Blocked ITC under GST Act in India

Under the Goods and Services Tax (GST) Act in India, Input Tax Credit (ITC) is a mechanism through which taxpayers can claim credit for the tax they have paid on their inputs. However, not all ITC is eligible for claiming, and some ITC may be blocked or apportioned based on certain criteria.

Here are the three types of ITC under GST Act in India:

Eligible ITC: Eligible ITC is the credit that is available to the taxpayer for claiming under the GST Act. To be eligible, the ITC should meet the following criteria:

a. The ITC should have been paid on goods or services that are used or intended to be used in the course or furtherance of business.

b. The taxpayer should have all the necessary documents to prove that the tax has been paid, such as a tax invoice or a debit note.

c. The tax should have been charged and paid under the GST Act.

d. The recipient of the goods or services should have received them.

Apportioned ITC: In some cases, the taxpayer may use goods or services for both business and non-business purposes. In such cases, the ITC that can be claimed is apportioned between the business and non-business uses based on a method prescribed by the GST Act. The apportionment is done to ensure that the ITC claimed is only for the business use of the goods or services.

Blocked ITC: Blocked ITC is the credit that is not available to the taxpayer for claiming under the GST Act. The GST Act has specified certain items for which ITC is blocked, and they include:

a. Motor vehicles and other conveyances, except when they are used for making taxable supplies such as transportation services, leasing or renting of such vehicles or conveyances, and their transportation of goods.

b. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing or renting of motor vehicles, and membership of a club.

c. Works contract services when supplied for construction of immovable property, except when used for further supply of works contract services.

d. Goods or services used for personal consumption.

e. Any tax paid in accordance with the provisions of Section 74, 129, or 130 of the CGST Act, 2017.

It is important for taxpayers to understand these different types of ITC and the criteria for claiming or apportioning them to ensure compliance with the GST Act.

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Eligible Input Tax Credit (ITC) under GST Act, 2017 in India

Under the Goods and Services Tax (GST) Act, 2017 in India, Input Tax Credit (ITC) is a mechanism through which taxpayers can claim credit for the tax they have paid on their inputs. To be eligible for ITC under the GST Act, the following conditions must be met:

The goods or services should have been acquired for use or supply in the course or furtherance of business. This means that the ITC is only available for goods and services that are used to make taxable supplies, and not for personal or non-business use.

The taxpayer should have all the necessary documents to prove that the tax has been paid, such as a tax invoice or a debit note.

The supplier of goods or services should have filed their GST returns, and the tax paid on such supplies should have been reflected in their return.

The tax paid should be a valid GST tax. This means that the tax should have been paid under the GST Act and not under any other tax law.

The taxpayer claiming ITC should have received the goods or services. If the goods or services have not been received, the taxpayer cannot claim ITC.

The ITC claimed should not be for goods or services that are specifically blocked under the GST Act. Examples of blocked ITC include goods and services used for personal consumption, motor vehicles except when used for transportation of goods or passengers, and food and beverages except in certain circumstances.

It is important for taxpayers to ensure that they meet all the eligibility criteria for claiming ITC under the GST Act. Any incorrect or false claim of ITC can lead to penalties and other consequences under the law.

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Apportioned (partly) Input Tax Credit (ITC) under GST Act in India

Under the Goods and Services Tax (GST) Act in India, when a taxpayer uses goods or services for both business and non-business purposes, the Input Tax Credit (ITC) that can be claimed is apportioned or partly eligible based on a prescribed method. This is because the taxpayer can only claim ITC for the business use of the goods or services, and not for their personal or non-business use.

The GST Act provides a method for apportioning ITC in such cases. The method is as follows:

If the taxpayer has used the goods or services exclusively for business purposes, the entire amount of tax paid on the goods or services can be claimed as ITC.

If the taxpayer has used the goods or services exclusively for non-business purposes, no ITC can be claimed.

If the taxpayer has used the goods or services for both business and non-business purposes, the ITC that can be claimed is apportioned based on the following formula:

ITC = (Total amount of tax paid on goods or services X Business use of the goods or services)

The business use of the goods or services is determined by the taxpayer based on any reasonable method. For example, a taxpayer may use the proportion of turnover generated from the business use of the goods or services to determine the business use percentage.

It is important for taxpayers to maintain proper records of the apportionment of ITC to avoid any disputes with tax authorities. They should also ensure that they follow the prescribed method for apportioning ITC and use a reasonable method for determining the business use percentage.

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Blocked Input Tax Credit (ITC) under GST Act, 2017 in India

Under the Goods and Services Tax (GST) Act, 2017 in India, there are certain situations in which Input Tax Credit (ITC) is blocked or not eligible for claiming. The following are some examples of blocked ITC under the GST Act:

Motor Vehicles: ITC for motor vehicles is generally not available except when they are used for transportation of goods or passengers, or when they are used for providing certain services like renting out to customers or driving schools.

Food and beverages: ITC for food and beverages, outdoor catering, and related services is not available except when they are used for business purposes like providing canteen facilities to employees.

Membership of clubs: ITC for membership of clubs, health and fitness centers, and other such facilities is not available.

Travel benefits to employees: ITC for travel benefits provided to employees like leave travel concession (LTC) is not available.

Works contract services for immovable property: ITC for works contract services for construction of an immovable property (other than plant and machinery) is not available.