Every registered person under GST can claim ITC of goods and services or both received in course or furtherance of business subject to certain stipulations as laid down primarily under Section 16, 17, and 18. Sub-section (5) of section 17(5) of Central Goods & Services Tax Act, 2017, gives comprehensive list of supplies on which Input tax credit is blocked, commonly known as “Blocked-Credit”. This list of blocked credit has been updated by amendment in GST Act which shall come into force from 1st February 2019 and the same is presented below in a tabular form for understanding purpose.

S. No. Nature of Goods or Service or both Exception (Who can claim ITC even when it is Blocked for others) Examples
1 Motor Vehicle for transportation of persons with seating capacity not more than 13 persons (including driver), except when the supply used for:-

a) Further supply of such motor vehicles

b) Further engaged in business of Transportation of Passengers

c) Training on driving of such motor vehicles

Credit shall be allowed only to such persons who are engaged in the supply of activities as mentioned in point no. a), b), & c) Company purchase car for director use or employee’s transportation, the ITC on such motor vehicle is not allowed.

But if such company purchase bus with seating capacity more than 13 persons for transportation of their employees, it can can claim ITC.

2 Purchase of Vessels and Aircraft except when they are used for:-

a) Further supply of such vessel and aircraft

b) Further engaged in business of Transportation of Passengers or Goods

c) Training on navigation of such vessel or flying such aircraft

Credit shall be allowed only to such persons who are engaged in the supply of activities as mentioned in point no. a), b), & c). [Subject to availing the benefit of entry no. 9(ii) of notification no. 11/2017-CT (R).] For example, ITC on purchase of aircraft for travel of Board of Directors of company cannot be availed.
3 Credit of following services not allowed w.r.t. motor vehicles, vessel and aircrafts as mentioned above

a) Service of General insurance

 b) Servicing, repair and maintenance

Credit of such services will be allowed only to those who are eligible to avail ITC on purchase of such motor vehicles, vessels and aircrafts. A transport company purchase truck for transportation of goods can claim ITC of such services, but a company bought car for director in the name of company cannot avail ITC on such services.
The manufacturer of such motor vehicles, vessels and aircrafts can claim ITC on such services. The vehicle manufacturers can claim ITC of such services like, TATA, Maruti, Honda etc.
The person engaged in the business of general insurance of such motor vehicles, vessels or aircraft insured by him. General insurance companies can avail the ITC of such services only in case where insurance is done w.r.t. motor vehicles, vessels and aircrafts by company and claimed by customer
4 Food & Beverages Credit of ITC is allowed only to such persons who further use these supplies to provide same category of supply or as an element of a taxable composite or mixed supply.

If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services.

Outdoor catering service availed by company for employees or any other person, the ITC on such service is not allowed. However, ITC of same is allowed if an outdoor caterer avail services of another caterer.

Hiring of Bus for transportation of employees, or cab facility, the ITC is not allowed.

Health insurance or Canteen in factory compulsory under Factory’s Act, then ITC can be claimed.

Outdoor Catering
Beauty Treatment
Health Services
Cosmetic & Plastic Surgery
Leasing Renting & Hiring of Motor Vehicles, Vessels and Aircrafts
Life Insurance
Health Insurance
5 Membership of Club, health & Fitness Centre If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services. For example, Golf club membership paid by company, then ITC is not allowed.
6 Travel Benefit Extended to Employees on Vacation such as leave or home travel concession If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services. For example, air ticket sponsored by company for holiday of employee, then ITC is not allowed.
7 Works Contract Service used for immovable property other than plant & machinery but including repair maintenance and renovation to the extent of capitalization Credit of ITC shall be allowed only to such persons who further use these supplies to provide same category of supply like construction of building etc. ITC on construction of office and factory is not allowed. However, if repair & maintenance is done and the same is not capitalized in books then ITC is allowed.
8 Goods and services received for Construction of Immovable Property on his own account Credit of ITC shall be allowed only to such persons who further use these supplies to provide same category of supply ITC of goods and services not allowed for Construction of new office/factory, whether goods are purchase by company itself.
9 Composition Dealer Goods and services on which tax is paid under composition scheme by the dealer, ITC shall not be allowed of such supply.
10 Goods and services received by Non-Resident Taxable Person Non-resident person supply goods and services in India except in case where goods imported by him This clause is applicable on non-resident persons only
11 Supply used for Personal Consumption For example, fees of director personal income tax return paid by company, then ITC on such inward supply is not allowed
12 Goods Lost, Stolen, Destroyed, Written off, free samples Goods stolen during transportation, then ITC is not allowed.
13 Tax Paid Under Section 74, 129 & 130 ITC is not allowed where tax has been paid by any person due to fraud, wilful-misstatement.

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6 Comments

  1. Kunjar Shah says:

    As per your point no.4 example column ITC on hiring of bus for employees not available. As per section ITC on hiring, leasing and renting of motor vehicle as specified under clause (a) is not available i.e. upto 13 seating capacity vehicles. there is no bar on ITC on hiring etc for vehicle having more than 13 seats.

  2. Rajkumar says:

    In point no.4, u told that hiring of bus for transportation of employees is not eligible itc.
    But in sl.no 1. Purchase of bus is eligible for itc.

    Even in amended act, 17(5)(b)(i) states that hiring of vehicles except when used for the specified therein…..

    For your perusal.

  3. sandip vasudev gandhe says:

    can we claim itc on purchases for construction of building of a builder as we are not sale any flat till now as the work is not completed and not taken set off . Is there any time period to claim itc

    1. You can claim the ITC on purchases if used for providing construction/works contract services even if the work is not completed. You can carry forward the ITC and can use the same for payment of GST at the time of sale. (In your case the GST on a sale of flat is applicable only when flat is sold before issuance of completion certificate by competent authority)

      You can claim ITC on or before the due date of GST return u/s 39 for the month of September following the end of the financial year to which such ITC pertains or the due date of annual return of such financial year, whichever is earlier.

      Further, for claiming ITC for FY 2017-18 the due date is extended by the government till the due date of GST return for the month of March 2019.

  4. CA Mihir Modi says:

    The second proviso that “If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services” is applicable only on sub-clause (iii) of Section 17(5)(b).

    Hence, first proviso to S.17(5)(b)(i) is required to be complied in order to avail ITC on food beverages, health/life insurance etc.

    Kindly correct the same

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