Items on which Input Tax Credit is not Available

input-tax-credit-not-available

Goods and Services Tax (GST) being One Nation One Tax is famous for the free flow of credits. But there are certain items on which Input Tax Credit (ITC) is unavailable to the taxpayer. It is crucial to understand about ITC, because it is directly linked to your GST tax payment. Therefore, any mistake may result in fine and penalties.

But before moving ahead we must be through with a simple question i.e. what ITC is?

With reference to clause 63 of section 2 of Central GST (CGST) Act, 2017 input tax credit means credit of input tax. Input tax which means Central tax (CGST), State tax (SGST), Integrated tax (IGST) or Union Territory tax (UTGST) charged on any supply received or purchased by a registered tax payable person on goods or services or both. For instance: A buy raw material from Agra. A’s vendor in Agra will now charge CGST and SGST. Henceforth, CGST and SGST shall be A’s input tax.

Items where ITC is unavailable:

  • Motor vehicles and other conveyance:

In accordance with GST law, ITC can’t be claimed on motor vehicles and other conveyance.

  • Membership of fitness center, health club:

If you have taken any membership for gym, health center, or any other club for sport or anything else, ITC isn’t allowed.

  • Travel benefits extended to employees on vacation such as leave or home travel concession:

If you have arranged any travel package for business purpose, ITC can’t be claimed.

  • Goods lost, stolen, destroyed, written off or disposed of by way of gift or 

free samples

If the goods are lost or stolen or destroyed as free samples, then ITC can’t be claimed in such cases.

  • Work contract services when supplied for construction of immovable  property:

As per GST, work contract service when supplied for construction, alteration, renovation etc shall not be allowed as ITC.

However, if a work contractor is taking help from another work contractor, then ITC to the former shall be available.

Composition:

The ITC on goods or services on which tax has been paid by composition dealer; ITC isn’t available.

  • Goods or services received by Real Estate Developer:

If goods or services or both are received by a taxpaying real estate developer for construction of immovable property (other than plant or machinery) on his own account including such goods or services or both are used in the course or carrying out business, ITC isn’t allowed.

  • Nonresident taxable Person:

If nonresident taxable person (NRTP) receives any goods or services, ITC can’t be claimed.

However, if NRTP imports any goods or services, ITC shall be available.

Further, on imports and exports, IGST act is applicable.

Note – Please note that the above article is for education purpose only. This is based on our interpretation of laws which may differ person to person. Readers are expected to verify the facts and laws.

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