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According to Section 17, the input tax credit is available only to the extent of the goods or services used for the business purpose or effecting taxable supplies including zero rated supplies as discussed earlier in Rule 42 & 43.

Apart from the above, there are goods and services which are not eligible for input tax credit, have been listed out under section 17 (5) as below:

1. Motor Vehicles and other conveyances

Input tax credit on purchase, maintenance, insurance in respect of motor vehicles are not eligible.

Input tax credit is available only when they are used for providing the following taxable supplies:

1. Further supply of such vehicles or conveyances

2. Transportation of passengers

3. Imparting training on driving, flying, navigating such vehicles or conveyances

4. Transportation of goods

2. Supply of Goods or Services not eligible for Input Tax Credit:

The following goods or services are not eligible for input tax credit:

1. Food and beverages

2. Outdoor catering

3. Beauty treatment

4. Health services

5. Cosmetic and plastic surgery

Note: If the above goods or services are used to provide outward taxable supplies of the same category then, input tax credit is available.

1. Membership of a club, health and fitness centre

2. Rent-a-cab, life insurance and health insurance – input tax credit available only where the same is provided to the employees by the employer as a statutory obligatory under any law as notified by the Government or such services are used to provide outward taxable supplies of the same category

3. Travel benefits extended to employees on vacation such as leave or home travel concession

3. Works Contract Service

Works contract services are not eligible for input tax credit when supplied for construction of an immovable property other than plant and machinery except where it is used as input service for further supply of works contract service.

Example 1: If ABC, a manufacturing company who manufactures steel, gives contract to XYZ, a construction company to construct a building for its office, ABC cannot take input tax credit on the invoice issued by XYZ.

While XYZ receives the service of painting of the office, from DEF, a service provider, XYZ can take input tax credit of the invoice issued by DEF as it is used as input service for providing works contact service of constructing the office to ABC.

4. Construction of Immovable Property by own account

When the goods or services received for construction of an immovable property other than plant and machinery by own account including when such goods or services or both are used in the course or furtherance of business

Example 2:

XYZ, a building contractor company, builds an office for its own use, it cannot take input tax credit.

Note: ‘Construction’ as mentioned in the point No. 3 & 4, includes re-construction, renovation, additions or alterations or repairs to the extent of capitalisation to the said immovable property.

Example 3: ABC as in the Example 1, makes some repair work in its office building and treats the expenditure as revenue expenditure, then it can take input tax credit.  If the expenses are capitalised in the books, then no ITC is available.

5. Composition Scheme

Composition dealers who pay tax under section 10, cannot take input tax credit on the goods or services or both received by them.

6. Non-Residents

Non-resident taxable person cannot take input tax credit on the goods or services or both received except on goods imported by him.

7. Personal Consumption

When the goods or services are used for personal consumption, input tax credit is not available.

8. Lost, Stolen, Destroyed, Free Samples, Gifts

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

9. Fraud, Seizure and Confiscation

Input tax credit is not available on any tax paid under the circumstances of the following sections:

Section 74 – Input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts

Section 129 – Input tax credit on the goods seized

Section 130Input tax credit on the goods confiscated

Note: Plant and Machinery means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes the below:

  • Land, building or any other civil structures
  • Telecommunication towers
  • Pipelines laid outside the factory premises

Author Bio

Post Graduate in Commerce having 17+ years of experience in Accounting & Taxation. Contact Email: uday.gstguide@gmail.com View Full Profile

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16 Comments

  1. Nilesh says:

    I have vending machine in office . i have purchased tea and coffee powder and 9 % cgst + 9 Sgst is charged in invoice ( HSN CODE 210120) . it is office expense for us..Can we take ITC for that.

  2. Kartik says:

    My company is sponsoring my education. However my company is manufacturing company and the course is not related to my company business. Can my company sponsor me and claim ITC? If so under what rule?

  3. Mrs Shubhangi K Sutar says:

    We are authorized dealer of items which are required by electronics industries. one of our customer required ESD Mat for their industries which is necessary for product quality and product preparation. the volume is large. Can the claim GST set off (ITC) on ESD Mat + Installation. Please inform our mobile no.9175834737. please help we want to get order.

  4. Subhash Kushwaha says:

    WE ARE MANUFACTURER OF PLANT AND MACHINERY AND SUPPLY OF ERECTION AND COMMISSIONING SERVICES.
    CAN WE AVAIL INPUT CREDIT OF GST ON PURCHASE OF AIR-CONDITIONER FOR USE IN OFFICE AT FACTORY.

  5. Multiuse says:

    Dear Sir,

    If a Partnership firm purchase a commercial heavy truck for transportation of good purpose. Can take input claim on purchase and after that claim refund through RFD01A.

    Pls suggest.
    Regards,

  6. yoursgstguide says:

    As per my opinion, HSN code for the lift is 8428 under the chapter 84-Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof. So the lift is basically considered as machinery. ITC is available if the same is used for making outward supply of goods or services or both. But we need to examine further if the same is considered as civil structure in other cases.

  7. Unnikrishnan.V says:

    well analys ed article.
    what about a n elevator /lift installed in a factory?
    in their admn office ?
    oR, whether lift can be construed as Part of Plant and machinery?

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