Section 17(5) of the Central Goods and Services Tax (CGST) Act, 2017 provides for the list of items for which Input Tax Credit (ITC) is blocked or ineligible. The items on this list cannot be used to claim ITC under any circumstances. The list of ineligible or blocked ITC under GST Section 17(5) includes:
1. Motor vehicles and other conveyances (except when they are used for making taxable supplies, such as in the case of transportation of goods or passengers, or imparting training on driving, flying, navigating, etc.)
2. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance and health insurance (except when they are used in the course or furtherance of business)
3. Rent-a-cab, life insurance, and health insurance (except when they are used for providing the same category of services)
4. Works contract services when supplied for construction of an immovable property (other than plant and machinery), except where it is an input service for further supply of works contract services
5. Goods or services received by a taxable person for construction of an immovable property on his own account (other than plant and machinery), except where it is an input service for further supply of works contract services
6. Goods or services used for personal consumption
7. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
8. Any tax paid in accordance with the provisions of sections 74, 129, and 130 of the CGST Act, 2017 (related to the recovery of tax, seizure and confiscation of goods and conveyances, and confiscation of goods and imposition of penalty).
It is important for taxpayers to be aware of the items on the list of ineligible or blocked ITC and not claim ITC on such items as it could lead to penalties and interest under the GST law.
Input Tax Credit (ITC) is a mechanism that allows taxpayers to claim credit for the tax paid on inputs (i.e., goods and services) used in the course of their business. Under the GST regime, the ITC is allowed to be claimed against the output tax liability, which is the tax payable on the taxable supplies made by the taxpayer. The ITC can be claimed on the tax paid on inputs, capital goods, and input services.
1. The taxpayer should be registered under GST and possess a valid GSTIN (GST Identification Number).
2. The taxpayer should have received the goods or services on which ITC is being claimed.
3. The taxpayer should have a valid tax invoice or any other prescribed document.
4. The taxpayer should have actually paid the tax on the inputs or input services.
5. The inputs or input services should have been used for business purposes.
There are certain goods and services for which ITC is not available, as listed under Section 17(5) of the CGST Act, 2017. These include motor vehicles (except when they are used for making taxable supplies), food and beverages, outdoor catering, beauty treatment, health services, rent-a-cab, life insurance, and health insurance, among others.
It is important for taxpayers to maintain proper records and invoices of the inputs and services for which they are claiming ITC, as the GST authorities may scrutinize the ITC claims during audits. Any incorrect or fraudulent ITC claims can attract penalties and interest under the GST law.
A: Input Tax Credit (ITC) is the credit of tax paid on inputs used in the course or furtherance of business that can be used to offset the tax liability on output supplies.
A: GST Section 17(5) provides a list of items for which ITC is blocked or ineligible.
A: The list of ineligible or blocked ITC under GST Section 17(5) includes items such as motor vehicles and other conveyances (except when they are used for making taxable supplies), food and beverages, outdoor catering, beauty treatment, health services, rent-a-cab, life insurance and health insurance, goods or services used for personal consumption, and any tax paid in accordance with the provisions of sections 74, 129, and 130 of the CGST Act, 2017.
A: It is important for taxpayers to be aware of the list of ineligible or blocked ITC under GST Section 17(5) because claiming ITC on these items could lead to penalties and interest under the GST law.
A: There are exceptions to the list of ineligible or blocked ITC under GST Section 17(5) for certain items, such as when motor vehicles and other conveyances are used for making taxable supplies, or when health and life insurance is provided to employees as part of a statutory obligation.
A: No, a taxpayer cannot claim ITC on goods or services used for personal consumption, as it is specifically mentioned in the list of ineligible or blocked ITC under GST Section 17(5).
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