GST input tax credit mechanism allows persons registered under GST to set-off their GST tax liability. Since GST is a consumption based tax, the input tax credit mechanism ensures that the ultimate GST liability is passed on to the consumer. Though input tax credit can be claimed by a person registered under GST for most inputs, some types of goods and services are not eligible for input tax credit claim. In this article, we look at such goods and services, which are not eligible for input tax credit under GST.

Motor Vehicles or Conveyances

Input tax credit can be claimed for motor vehicles or conveyance only when they are used for making a further supply of such vehicles or conveyances or transportation of passengers or imparting training or for transportation of goods. Hence, expenses related to the normal use of motor vehicles for office purposes cannot be claimed as an input tax credit.

Food, Beverages and Outdoor Catering

Expenses relating to food, beverages and outdoor catering can be claimed as input tax credit only when 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. Hence, regular taxpayers would not be eligible for claiming input tax credit on expenses relating to food, beverages and catering.

Beauty Treatment, Health Services & Cosmetic and Plastic Surgery

Beauty treatment, health services, cosmetic and plastic surgery related expenses cannot be claimed as input except when 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 as an element of a taxable composite or mixed supply.

Similarly, expenses relating to membership of a club, health and fitness centre is not eligible for input tax credit.

Life and Health Insurance

Expenses relating to rent-a-cab facilities, life or health insurance can be claimed as input tax credit only when the Government notifies it as services which are obligatory for an employer to provide to its employees under law. Else, to claim input tax credit, the inward supply must have been used for making an outward taxable supply of the same category or as part of a taxable mixed supply.

Travel Benefits for Employees

Travel benefits extended to employees on vacation such as leave or home travel concession cannot be claimed as input tax credit.

Works Contract Services

Works contract services, when supplied for construction of an immovable property (other than plant and machinery), cannot be claimed as input tax credit. However, work contract services can be claimed as an input tax credit when it is an input service for the further supply of works contract service.

Construction of Immovable Property

Goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account or even when it’s used in the course or furtherance of business cannot be claimed as input tax credit. Under GST Act, construction includes re-construction, renovation, additions or alterations or repairs.

Non-Resident Taxable Person

Goods or services received by a non-resident taxable person except on goods imported by him is not eligible for input tax credit.

Know more about GST registration for non-resident taxable person.

Personal Consumption

Goods or services used for personal consumption is not eligible for input tax credit.

Lost or Stolen or Damaged Goods

Input tax credit is not available for goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Composition Supply

Goods or services or both on which tax has been paid under the Composition Scheme will not be eligible for input tax credit. Also tax paid as interest, penalty or fine will not be eligilbe for input tax credit

Disclaimer: The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon.

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7 responses to “Items Not Eligible for Input Tax Credit under GST”

  1. sangappa gadagi says:

    what’s about “ITC on packing material” like: empty gunny / HDPE bags used for packing of exempted & taxable agricultural produces purchased at APMC (food grains,pulses,oil seeds) and supplies to intra & interstate

  2. Sanjib Mazumder says:

    Thanks for articles . please clearify the following*- Goods and service on construction of immovable property Input tax cannot be claimed under GST but Renting of immovable property service it is not clear. Wheather input can be taken or not. some service received for building e.g. Insurance of Building, man power supply, Auditor service and others service which related to renting.

  3. CA Narendra Kothari says:

    Please clarify below :-

    “expenses related to the normal use of motor vehicles for office purposes cannot be claimed as an input tax credit.”

    That means one can not claim ITC on repair maintenance of motor vehicles ??

    is there is any difference office purpose or factory purpose or purpose for delivery of goods ???

  4. KRUTARTH DAVE says:

    Thanks for article. But one minus point is not mentioned the related sections of the act.

  5. Mohit Pande says:

    Please clarify whether ITC can be claimed by Housing Society as Goods or services used for personal consumption of members?

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