Block credit - Use of services of Food, Catering, Vehicle Renting, Club, & Travel [Section 17(5)(b) of CGST Act] - GST Ready Reckoner - GST

Block credit - Use of services of Food, Catering, Vehicle Renting, Club, Travel Clause (b) of Section 17(5) Food, Catering, Vehicle Renting, Club, Travel (i) (a) The following supply of goods or services or both - Food and beverages, Outdoor catering, Beauty treatment, Health services, Cosmetic and plastic surgery, Life insurance and Health insurance: Leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) of section 17(5) of CGST Act except when used for the purposes specified therein, [ refer the clarification issue no. 2 mention below] (b) Exception The input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both, or as an element of a taxable composite or mixed supply. [ sub- clause (i) of clause (b) of sub- section (5) of section 17 ] (ii) The following supply of goods or services or both; Membership of a club, health and fitness center; an [ sub- clause (ii) of clause (b) of sub- section (5) of section 17 ] (iii) The following supply of goods or services or both; Travel benefits extended to employees on vacation such as leave or home travel concession. [ sub- clause (iii) of clause (b) of sub- section (5) of section 17 ] (vi) For the purpose of sec 17(5)(b) [ whole sub section (b) of 17(5) ], 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. [ refer the clarification issue no. 1 mention below ] Examples Example 1:- Inward supply from registered person of food beverages by Reliance fresh who is further supplying food beverages to customers. In the given case, it is used by the registered person for making outward supply of same category of goods its falls in the exceptional clause of the given section 17(5)(b) of CGST Act. so in that case ITC on inward supply on food beverages available to Reliance fresh. . Example 2:- Inward supply from registered person of outdoor catering to a manufacturing company for celebration its 25th year of success. In the given case, it is not used by the registered person for making outward supply of same category of services id used for its own company. so in that case ITC on outdoor catering services can not availed for a manufacturing company. Example 3:- Inward supply from registered person of beauty treatment services by a film production company. In the given case, it is not used by the registered person for making outward supply of same category of services is used for its own company. so in that ITC on inward supply not available to film production company. Example 4:- Smart Pvt. Ltd. (registered person) takes annual membership of a fitness services from HiFi Fitness center also registered for use of its employees. In that case Smart Pvt. Ltd. cannot take ITC on inward services on the GST paid on Member ship charges. Example 5:- Varn Pvt. Ltd. registered person reimburse its senior employees on travel expenses as part of LTA (Leave Travel Allowances). In that case, Varn Pvt. Ltd. cannot take ITC on inward supply related to Leave travel allowances expenses incurred by the senior employees. CBIC provide clarification in respect of section 17(5)(b) of CGST Act in Circular No. 172/04/2022-GST dated 6th July, 20 Issue 1:- Whether the proviso at the end of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the entire clause (b) or the said proviso is applicable only to sub-clause (iii) of clause (b). Legal provision:- the proviso after sub- clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act provides as under: Provided that 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 . clarification:- It had been clarified that scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force. it is clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. Issue 2:- Whether the provisions of sub- clause (i) of clause (b) of sub- section (5) of section 17 of the CGST Act bar availment of ITC on input services by way of leasing of motor vehicles, vessels or aircraft or ITC on input services by way of any type of leasing is barred under the said provisions? Legal Provision:- Sub-clause (i) of clause (b) of sub- section (5) of section 17 of the CGST Act provides that ITC shall not be available in respect of following supply of goods or services or both- (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. Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply clarification :- It is clarified that leasing referred in sub-clause (i) of clause (b) of sub-section (5) of section 17 refers to leasing of motor vehicles, vessels and aircrafts only and not to leasing of any other items . Accordingly, availment of ITC is not barred under sub-clause (i) of clause (b) of sub-section (5) of section 17 of the CGST Act in case of leasing, other than leasing of motor vehicles, vessels and aircrafts.