Eligibility and conditions for taking Input Tax Credit (ITC) under GST_Part-2

[Ganeshan Kalyani]

As per section 17(5) of CGST Act, 2017, the Input Tax Credit (ITC) shall not be available in respect of the followings, namely:-

1. Clause (a): Motor vehicles used for transportation of persons having approved seating capacity of up to thirteen persons (including the drivers).

And when they are used for making further supply of such vehicles or for transportation of passengers or imparting learning on driving such motor vehicle, the credit would be eligible.

2. Clause (aa): Vessels and aircraft.

And when they are used for making taxable supplies namely:- i) further supply of such vessels or aircraft; or transportation of passengers; or imparting training on navigating such vessels; or imparting training on flying such aircraft; ii) for transportation of goods, the credit would be eligible.

3. Clause (ab): Services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause(a) or clause (aa).

And when these services are incurred for the purposes specified in clause (a) and (aa) (as mentioned in point no. 1 & 2 above), the credit would be eligible.

And also when these services are received by a taxable person engaged in the manufacturing of such motor vehicles, vessels or aircraft; or in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him, the credit would be eligible.

4. Clause (b): i) Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

And when a registered person use inward supply of such goods or services or both for making an outward supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply, the credit would be eligible.

ii) membership of a club, health and fitness centre; and travel benefits extended to employees on vacation such as leave or home travel concession:

The input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

5. Clause (c): works contract services when supplied for construction of an immovable property.

And when they are used for plant and machinery and also where it is an input service for further supply of works contract service, the credit would be eligible.

6. Clause (d): goods or services or both received by a taxable person for construction of an immovable property on his own account including when such goods or services or both used in the course or furtherance of business.

And when they are received for plant or machinery, the credit would be eligible.

For the purpose of this clause (c) and (d) (point 5 & 6 above) the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

7. Clause (e): goods or services or both on which tax has been paid under composition scheme as Per section 10.

8. Clause (f): goods or services or both received by a non-resident taxable person.

And when the goods is imported by him, the credit would be eligible.

9. Clause (g): goods or services or both used for personal consumption.

10. Clause (h): goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of section 74, 129 and 130 (sections heading referred below)

Explanation: For the purposes of this chapter i.e. V (Input Tax Credit) and Chapter VI (Registration), the expression "plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excluses-

                (i) land, building or any other civil structures;

                (ii) telecommunications towers; and

                (iii) pipelines laid outside the factory premises. 

Reference: Section 74: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts.

Section 129: Detention, seizure and release of goods and conveyances in transit.

Section 130: Confiscation of goods or conveyances and levy of penalty.

Input Tax Credit is not allowed to take for the tax, penalty paid to release the goods or conveyances which was detained for one of the ground that e-way bill is not accompanied with the conveyance or the details on the e-way bill does not match with the details on the tax invoice or appropriate document viz. tax invoice, bill of supply, delivery challan was not found. Therefore, the registered person has to take utmost care to ensure that proper documents with proper description is carried with the conveyance. Otherwise the tax paid is an expense.