Understand Section 17 of the CGST Act 2017: Apportionment of Credit & Blocked Credit. FAQs on Input Tax Credit, business and personal use, exemptions, and treatment of ineligible ITC.
What Section 17 Say : Section 17 of the CGST ACT 2017 talks about Input Tax Credit Apportionment and Blocking of Ineligible GST Credits. GST was introduced to provide Seamless Flow of Input Tax Credit throughout the entire Supply chain and to avoid cascading of taxes. Input Tax Credit mechanism the main strength of GST Law. It is the ITC which makes the GST essentially as Value Added Tax .
Now let us understand the Above Section in an Question and Answer Format.
FAQ ON APPORTIONMENT OF CREDIT AND BLOCKED CREDIT
Q1 Whether Input Tax Credit be used for Both Personal and Business Purpose?.
Ans The ITC shall be available only to the extent used for Business Purpose.
Q2 Whether Input Tax Credit used for Exempt Supplies can be Claimed?.
Ans No only for Taxable Supplies including Zero Rated Supplies Such as Export.
Q3 Whether Input Tax Credit can be Taken by Composite Dealer?.
Ans No the Composite Registered Person cannot claim Input Tax Credit.
Q4 Whether Input Tax Credit can be claimed for Goods Stolen, Destroyed, Sample?
Ans No ITC cannot be claimed.
Q5 Whether Tax Paid u/s 74,129 and 130 ITC can be claimed?.
Ans No ITC cannot be claimed where the demand any has been recovered under said sections.
Q6 How to Show Ineligible ITC in GSTR-3B?.
Ans Ineligible ITC head under All Other ITC Table 4(B) of GSTR-3B.
Q7 How Ineligible ITC to be Treated in Books of Accounts?.
Ans It is advisable to expense of Such ITC whose Claim is Ineligible.
Q8 What to do where any ineligible ITC has been Claimed?.
Ans If the upcoming GSTR-3B date is due then ITC reversal can be done in that GSTR-3B or else through DRC-03 along with necessary Interest.
Q9 Whether GST paid on Repair and Maintenance Services of Buidling can be claimed?.
Ans Either Capitalised in the Building Cost or Expense off in the Profit and loss account.
Q10 Can Non Resident Taxable Person claim ITC on Domestic Purchases?.
Ans No Non Resident Taxable Person cannot claim ITC on Domestic Purchases except on Import of Goods.
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The Reference from the GST Law has been described as below:
Section 17 – Input Tax Credit Apportionment and Blocking of Ineligible GST Credits
(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under thisAct or underthe Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. [Explanation.— For the purposes of this sub-section, the expression “value of exempt supply‘‘ shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule;].
(4) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of subsection (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse: Provided that the option once exercised shall not be withdrawn during the remaining part of the financialyear:
Provided further that the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.
(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following, namely:—
(a) [motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:— (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles;
(aa) vessels and aircraft except when they are used–– (i) for making the following taxable supplies, namely:— (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available— (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged— (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;]38
(b) [the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both 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;
(ii) membership of a club, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.]
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation.––For the purposes of clauses (c) and (d), the expression ―construction‖ includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
(e) goods or services or both on which tax has been paid under section 10;
(f) goods or services or both received by a non-resident taxable person except on goods imported by him;
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
(6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed.
Explanation.––For the purposes of this Chapter and Chapter VI, the expression ―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—(i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises.
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Disclaimer: The above said article is author viewpoint only, please refer respective sections , rules framed under GST
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