As popularly known, the seamless flow of input tax credit was one of the basic purposes behind the introduction of Goods and Services Tax (GST) in India.
Putting up in simple terms, ‘input tax credit’ means claiming the credit of tax paid on the purchase of goods or services or both which are used for providing output taxable supply.
However, it is important to note that input tax credit of goods or services covered under the provisions of section 17(5) of the Central Goods and Services Tax Act, 2017 is not available.
Notably, GST is paid on such goods or services as listed out under section 17(5), however, the buyer/ purchaser cannot claim the input tax credit on the same. Hence, as the input tax credit is not available, the same is termed as ‘Blocked Input Tax Credit’.
In the present article we will go through the provisions of section 17(5) of the Central Goods and Services Tax Act, 2017; a list of ‘Blocked Input Tax Credit’ along with exceptions; easy identification of ‘Blocked Input Tax Credit; the reflection of ‘Blocked Input Tax Credit’ in Form GSTR-3B and Frequently Asked Questions (FAQs).
Section 17(5) of the Central Goods and Services Tax Act, 2017 –
Firstly, it is important to note that provisions of section 17(5) of the Central Goods and Services Tax Act, 2017 overrides both the following sections –
1. Section 16(1) which states that the registered person will be entitled to take credit of input tax used/ intended to be used in the course or furtherance of business; and
2. Section 18(1) which deals with the availability of input tax credit in special circumstances.
Accordingly, overriding both section 16(1) and section 18(1), provisions of section 17(5) simply state that input tax credit shall not be available in respect of listed goods or services or both. The list of said ‘blocked input tax credit’ is detailed below.
List of ‘Blocked Input Tax Credit’ along with exceptions –
The following table provides the list of ‘Blocked Input Tax Credit’ as covered under provisions of section 17(5) of the Central Goods and Services Tax Act, 2017 along with the exceptions to the same –
|
List of Blocked Input Tax Credit (i.e. Input Tax Credit is not available) |
Exception to ‘Blocked Input Tax Credit
(i.e. circumstances when the input tax credit is available) |
| Motor vehicles, vessels and aircraft | |
| Motor vehicles, having an approved seating capacity of not more than 13 persons (including drivers), which is used for transportation of persons. | However, the input tax credit will be available if such a motor vehicle is used for providing any of the following taxable supplies –
1. Transportation of passengers; 2. Further supply of such motor vehicles; 3. Providing training on driving such motor vehicles. |
| Vessels and aircraft | However, the input tax credit will be available if such vessels and aircraft are used for providing any of the following taxable supplies –
1. Transportation of passengers; 2. Transportation of goods; 3. Further supply of such vessels and aircraft; 4. Providing training on navigating such vessels or flying such aircraft. |
| Service relating to general insurance/ servicing/ repair and maintenance of motor vehicles, vessels or aircraft (as stated above) | However, the input tax credit will be available when such services are received by the taxable person engaged in –
1. Manufacture of such motor vehicles/ vessels/ aircraft; 2. Supply of general insurance services with regard to such motor vehicles/ vessels/ aircraft. Additionally, the input tax credit of such services will also be available when motor vehicles/ vessels/ aircraft are used for the purposes as stated above. |
| Leasing or Renting or hiring of motor vehicles/ vessels/ aircraft | The Input tax credit will be available when motor vehicles/ vessels/ aircraft are used for the purposes as stated above. |
| Others | |
| Works contract service when supplied for construction of an immovable property (other than plant and machinery) | The Input tax credit will be available when such works contract service is input service for further supply of works contract service. |
| Goods or services or both received for ‘construction’ of an immovable property (other than plant and machinery). Notably, such credit is not available even if the same is used in the course of furtherance of business.
Importantly, the term ‘construction’ includes re-construction, renovation, additions/ alterations/ repairs of an immovable property. |
– |
| Goods or services or both, wherein, the tax is paid under section 10 i.e. composition scheme. | – |
| Goods or services or both received by a non-resident taxable person. | Goods are imported by a non-resident taxable person. |
| Goods or services or both when used for personal consumption | – |
| Goods lost or stolen or destroyed or written off or disposed of by way of gift/ free sample. | – |
| Tax paid in accordance with the provisions of the following sections –
1. Section 74 – Tax not paid or short paid by reason of fraud or willful misstatement or suppression of facts; 2. Section 129 – Detention, seizure and release of goods/ conveyance; 3. Section 130 – Confiscation of goods/ conveyance. |
– |
The Input tax credit will not be available for the following supply of goods or services or both –
|
The Input tax credit will be available where an inward supply of such goods or services is used for making taxable outward supply of the same category of goods or services or as an element of taxable composite/ mixed supply. |
Easy identification of ‘Blocked Input Tax Credit’ –
Going through the above long list of ‘Blocked Input Tax Credit’ vis-à-vis its applicability to each individual, there are more chances of confusion.
To ease up the same, notably, an auto-drafted statement in Form GSTR-2B provides details of both eligible as well as an ineligible input tax credit.
Post figuring out the ‘Blocked Input Tax Credit’, to re-verify the same, it is advisable to match the ‘Blocked Input Tax Credit’ figures with the figures covered under the auto-drafted statement in Form GSTR-2B.
Reflection of ‘Blocked Input Tax Credit’ in Form GSTR-3B –
As per the latest Form GSTR-3B amendment as introduced vide notification no. 14/2022 dated 5th July 2022 and followed by clarification introduced vide circular no. 170/02/2022-GST, the details of the ‘blocked input tax credit’ as per section 17(5) is to be reflected in Form GSTR-3B in the following manner –
- Details of an ineligible input tax credit is to be provided in Table 4(B) of Form GSTR-3B;
- Importantly, such details of ineligible input tax credit u/s. 17(5) is not to be provided further in Table 4(D)(1).
Frequently Asked Questions (FAQs) –
Frequently Asked Questions with regard to provisions of ‘Blocked Input Tax Credit’ as covered under section 17(5) of the Central Goods and Services Tax Act, 2017 are answered hereunder –
Q.1 What is Section 17 (5) in GST?
Ans. Section 17 (5) in GST lists down the goods or services or both in respect of which input tax credit is not available to the registered person under GST.
Q.2 What is ITC reversal as per Section 17 (5)?
Ans. In case input tax credit of goods or services listed down under provisions of section 17(5) is availed, such ITC needs to be reversed by the registered person.
Q.3 What does blocked credit mean?
Ans. In simple terms, input tax of specified goods or services or both which is prohibited to be availment by the registered person under GST is known as blocked credit.
Q.4 How do I reverse an ineligible ITC?
Ans. In order to reverse an ineligible ITC as per provisions of section 17(5), one needs to reflect the same in Table 4(B) of Form GSTR-3B.
Q.5 In which cases ITC is not available?
Ans. ITC is available in respect of goods or services used in the course or furtherance of business. However, ITC in respect of goods or services listed down under provisions of section 17(5) is not available.
Q.6 On which goods ITC is blocked?
Ans. ITC in respect of goods which are lost or stolen or destroyed or written off or disposed of is blocked. Further, ITC in respect of goods used for the personal purpose is blocked.
Author Bio
GST ON INPUT MATERIAL PURHASE TO CONSTRUCT THE BUSINESS GODOWN FOR USE OF STORAGE OF TRADING GOODS, WHETHER, ITC AVAILABLE OR NOT, KINDLY ADVICE AND HELP.
THANKS,
Sir,
Is the iTC on the purchase of a new motor car available? I am a professional income
Pls clarify
Thanks & regards
Vasant D.
I have claimed cess in form gstr-3b during the year 2022-23 but not utilised and reverse it in the Form GSTR-3B in next period. what is the treatment in annual return
Useful information
very well defined. Easy to understand. Thank you
Very well explained!
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