Block credit under GST refers to the amount of input tax credit that cannot be claimed by a taxpayer under certain conditions specified in the GST law. Input tax credit is the tax paid on inputs (i.e., goods and services) used for making taxable supplies. The conditions under which input tax credit can be claimed are specified in the GST law. If these conditions are not met, input tax credit will be blocked and cannot be claimed. Some examples of items that may result in the blockage of credit include motor vehicles and other conveyances (unless they are used for making further supplies of such vehicles or conveyances or used for transportation of goods), food and beverages, outdoor catering, beauty treatment, health services, insurance, and works contract services used for construction of an immovable property (other than plant and machinery).
Block credit refers to a mechanism in the Goods and Services Tax (GST) system where the Input Tax Credit (ITC) that a taxpayer is eligible to claim is limited to a certain percentage of the total eligible ITC.
The impact of block credit on a taxpayer's GST liability is that it reduces the amount of ITC that can be claimed by the taxpayer, which in turn increases their GST liability. This means that the taxpayer will have to pay more GST out of their own pocket, as they are not able to fully offset their GST liability with ITC. The specific impact on the taxpayer's GST liability will depend on the percentage of block credit applicable to their business and the amount of eligible ITC they have incurred.
Here are some frequently asked questions (FAQs) about block credit under GST:
A: Block credit refers to the amount of input tax credit that cannot be claimed by a taxpayer under GST. There are certain conditions under which input tax credit cannot be claimed, which results in the blockage of credit.
A: Some examples of block credit under GST include:
1. Motor vehicles and other conveyances (unless they are used for making further supplies of such vehicles or conveyances or used for transportation of goods)
2. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre
3. Rent-a-cab, life insurance, health insurance
4. Travel benefits extended to employees on vacation such as leave or home travel concession (LTC)
5. Works contract services used for construction of an immovable property (other than plant and machinery)
A: No, block credit cannot be claimed in any circumstance. The conditions under which input tax credit can be claimed are specified in the GST law. If the conditions are not met, input tax credit will be blocked and cannot be claimed.
A: Yes, a taxpayer can claim input tax credit on motor vehicles and other conveyances if they are used for making further supplies of such vehicles or conveyances or used for transportation of goods.
A: Input tax credit on food and beverages is generally blocked under GST, unless they are supplied as part of the taxable supply of goods or services or are used for making further supplies of such goods or services.
A: Input tax credit on works contract services used for construction of an immovable property (other than plant and machinery) is generally blocked under GST. However, input tax credit can be claimed on works contract services used for the construction of a plant and machinery, which can then be used for further supply of goods or services.
A: The amount of input tax credit that is blocked under GST cannot be used to reduce a taxpayer's GST liability. The taxpayer will have to pay GST on the blocked amount.
Transitional Provisions in Certain Cases under GST
GST practitioner: Section 48 of CGST Act, 2017
Whether Voluntary payment of GST penalty takes away right of Appeal?
