CA Amit Maheshwari

The GST Act is still going from lot of changes with respect to its provisions and different rates of taxes.

One of the important aspects of GST is on which supplies is the input tax credit not available or is prohibited.

Provision governing the prohibition of input tax credit on certain supplies:

Under section 17(5) of CGST Act, there are certain supplies on which input tax credit under GST is not available.  These supplies can also be said as blocked credit.

Note on supplies on which Input Tax credit is not available:

1. Motor vehicles and other conveyances except when they are used

a) For making further supply of such vehicles or conveyances

b) Transportation of passengers

c) Imparting training on driving, flying, navigating such vehicles or conveyances

d) For transportation of goods.

Examples where credit of motor vehicles can be availed:  Dealer of vehicles, cab providers, trucks/vehicles used by factories for transportation of goods.

It is important to understand that there is nothing mentioned about whether the credit would be available on purchase of motor vehicle. Since, the act provides that the credit is not available on motor vehicles it can be concluded that all input tax credit in relation to motor vehicle cannot be claimed except used in the supplies as mentioned above.

2. Supply of goods/or services such as:

a) Food and beverages

b) outdoor catering,

c) beauty treatment,

d) health services,

e) cosmetic and plastic surgery

except where an inward supply of goods or services or both of a particular category 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;

Example: Purchase of food items by a company, beauty treatment used by the person in a hotel.

However, if the person is in business of same category of goods or services input will be allowed.

3. Membership of a club, health and fitness center

4. Rent-a-cab, life insurance and health insurance except where-

a) The Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

b) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

c) Travel benefits extended to employees on vacation such as leave or home travel concession;

Here the important exception is that if such supply of goods or supply is used by registered person for making outward taxable supply of same category or services or both then the input of such inward supply is allowed. Also, if such inward input supply is used in making a taxable composite or mixed supply then also the input is allowed.

For Example: The free cabs are provided by hotels to guests for pick and drop facility to airport. The rent charged by the cab owner from the hotel can be claimed as input as the cab service by hotel was a part of mixed and composite supply of its main supply.

5. works contract services when supplied for construction of immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;

6. goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including such goods or services or both are used in course of furtherance of business;

*It is to be noted that the credit is blocked only for the construction of immovable property and not on the routine repairs to the immovable property.

7. Goods or services or both on which tax has been paid under Section 10.

Section 10 is for composition dealers and thus no input is allowed to composition dealers.

8. Goods or services or both received by a non resident taxable person except on goods imported by him

9. Goods or services or both used for personal consumption

10. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples

This means that the registered person who supplies goods as samples or free supplies, no input will be allowed on purchase or manufacture of such goods.

11. Any tax paid in cases of: 

Section 74: provides for the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of fact;

Section 129: Detention, seizure and release of goods and conveyances in transit and the tax paid in this procedure;

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

(Author can be reached at [email protected])

More Under Goods and Services Tax

44 Comments

  1. SUNDER SINGH says:

    IF I AM BOOK A CAB FOR MY OFFICE TO MY CLINT OFFICE FOR BUSINESS PURPOSE, THEN CAN IN CLIME INPUT ON RCM UNDER RENT A CAB.

  2. Naresh Chauhan says:

    Dear Sir/Madam
    My Question is that I m proprietor of restaurant firm not Hotel
    We received invoices with Gst of rental and maintenance
    Can we get ITC on said invoices or Not?

    Please update

  3. N K Prasad says:

    ITC allowable or not…..
    Condition- We have sold a medicine item on scheme i.e. the purchaser will get one bed sheet on purchase of 100 units of a Cough Syrup. ITC on bed sheet purchase is allowable or not ?

  4. ramanlal says:

    my client making tax free goods like khadi & cloths but purchase is taxable goods so he claimed credit or not in gstr 9 ? or Ineligible ITC so which section we show in 3 b or gstr9?

  5. A Mahaboob Basha says:

    On of My claint is a Doctor, she construct building and rented the property commercial parties, she can claim inputs on purchase of raw material

  6. Ankit says:

    Hello All,

    My Name is Ankit

    And i have one questions

    My company is FMCG so we provide the sample of product to customer. but we create the sample invoice is without GST and then our liabilities amount on sample we less our input tax credit.

    Is this is correct as per GST Law?

    And i don’t know how to show less ITC value (Against sample liabilities) in GSTR-3B on which field.

    till now we show less ITC value in Reversal field in GSTR-3B. Is that correct?

  7. Mishal Mehta says:

    Dear Sir,

    One of my client is in the business of Construction Immovable Property, he has the ITC in this account of around 26 Lacs. He constructed 10 unit in the project. He will receive BUC from local authority on 01.03.2019. Hence sir he is not liable to collect GST from customer from 01.03.2019. Sir my question is that my client will going to let out two unit for rent from 01.03.2019, so can claimed proportionate ITC on the same out of 26 lacs .

  8. CA GEETANSHU GUPTA says:

    Credits of a works contract services are blocked when it is being used for construction of an immovable property.
    Construction has been defined in explanation to section 17(5)(d), which says re-construction, repair, renovation, additions or alteration, TO THE EXTENT OF CAPITALISATION, to the said immovable property.
    OPINION :- routine repair are not in nature of capitalization, therefore it is not considered as construction, so ITC of works contract for routine repair will be available.

  9. R.Mohan says:

    Dear SIr in thee article u have mmentioned that”It is to be noted that the credit is blocked only for the construction of immovable property and not on the routine repairs to the immovable property.

    but if u reffer section 2(119) of CGST it includes rapeir / renovation / maintenance etc., under the term works contract. Kindly clarify the position now: pl for ur ready reference sec 2(199) reproduced below:
    section 2(119) of CGST Act “works contract” is defined as a contract for:
     building, construction,
     fabrication,
     completion, erection, installation,
     fitting out, (we need to consider this aspect also)
     improvement, modification,
     repair, maintenance, renovation,
     alteration or commissioning

  10. RAJESH says:

    SINCE WE ARE AN EXPORT CO. OUR DIRECTORS FREQUENTLY TRAVEL ABROAD FOR BUSINESS PURPOSE,
    CAN WE CLAIM REFUND FOR THE GST REFUND ON AIR TICKETS.

  11. LINGRAJ SINGH says:

    sir i have a petrol pump, and oil company , give invoice against license fees renewal for petrol and disel and take 28% percent GST on it, can i claim this itc on sale of other GST taxable item

  12. Krishna M says:

    If we purchase taxable item i.e raw material from registered dealer but after manufacturing it converts to exempted. What can I do for GST ITC? that means it comes under section 42 or 17(5)

  13. vishal puri says:

    Respected Sir,

    Please solve our doubts,

    I have a company which is doing two business in one ranted place which rent is 3 lacs

    firstly a children’s amusement which is under 18 % GST (with ITC)
    secondly a restaurant for birthday Parties of children’s, under 5% GST (without ITC)

    i have a question that we take GST Registration in April 2018 but our Business work start from August -2018,

    We take per month full GST Input on Rent, but now we understand that our sale ratio is 70% (on Children’s amusement) + 30% (on restaurant for birthday Parties )

    now we take the GST input 70% rest 30% under block credit due to restaurant 5% GST without ITC.
    what can we do previous input from April 2018 to Aug-2018 is it recoverable or ineligible.

    Please guide us

  14. Ashwin Takalkar says:

    Respected Sir,

    Please guide us regarding applicability of section 17(5) & rule 42 for RCM credit in applicable or not.
    In the month of July, Aug, Sept & Oct 2017 we have paid RCM on all unregistered purchase on which some services and goods credit is disallowed under section 17(5) & other eligible credit we have taking in proportionate under rule 42. Now we are paying RCM on GTA & Legal expenses (Advocates Bills) & availing proportionate credit under rule 42.

    Please guide us whether these section & rule is applicable for RCM credit also or we can take 100% credit for RCM in all conditions?

    Thanks & Regards,
    Ashwin Takalkar
    +91-9850558755

  15. abhishek singh says:

    Dear Sir,

    Abhishek Here,

    In case we have sent a car for repair gst bill raised by repair center .
    Can i calim input tax ?
    i am not a company for sales and purchase vehicle.
    Our business are in jewellery individual

    Please suggest

  16. Subash Yadav says:

    Initial Construction Of Immovable Property except Plant & Machinery can’t claim ITC but Repair and Maintenance of the same then ITC can be Claimed . ITC means Input Tax Credit

  17. vijay says:

    Dear Sir,

    Vijay Here ,

    In Case of Builders & Developers ,if i get the Occupation Certificate for a Particular project and after that expenses are going on .

    Should i take credit of ITC ?

    OR

    if not, erroneously refunded of ITC claim in GST 3B, should i reversed in march 18 under ineligible ITC U/S 17 (5).

    Awaiting your reply

  18. himanshu says:

    under bare act Section 17 (5)(d) explanation also given there regarding construction which includes re-construction, renovation & repairs

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