Advocate M Sudhakar
Model GST Law published on 25th Nov 2016 prescribes certain conditions and eligibility for taking input tax credit.
Section 16 prescribes eligibility and conditions for Input Tax Credit.
As per Section 16 (1) Every registered taxable person is eligible subject to the time and manner specified in Section 44 and be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business.
Plain reading of the above will give a clear picture that Input Tax Credit used or intended to be used in the course of business or for furtherance of business is eligible for Input Tax Credit.
There is a contradiction to this section 16 (1) by putting restrictions for use in section 17. Section 17 reads as apportionment of credits and blocked credits.
As per section 17 there are various Input Tax Credits which are blocked, and it means they are not available for Input Tax Credit.
All the above services are provided by Companies to its employees and the expenses are business expenses. These Inputs are used in the course of business and for furtherance of business.
Though the services mentioned above are not obligatory to provide, all most all the businesses require most of these services for its operations. For example in a manufacturing environment or in a software facility, can any management think of not providing catering facilities for its employees. Medical Insurance and facilities like rent a Cab are must for any organization. These are the basic requirements for any business house to facilitate.
Why this dichotomy in allowing the usage of Input Tax Credit.
If the expenses are consumed for business, the Input Tax Credit on all the above business expenses are to be allowed, to pass on the benefit to the end user. This will avoid the cascading effect and give a true and fair seamless credit to the GST Law.
In the spirit of Seamless Input tax credit, on the above blocked inputs, credit of input tax has to be allowed.