Restriction on Input Tax Credit under GST
Uninterrupted and seamless chain of input tax credit is one of the key features of Goods and Services Tax. “Input Tax” means the Central tax, State tax, Integrated tax or Union territory tax paid on any services or goods or both which are used or intended to be used in the furtherance of business.
However, No Input Tax Credit is available in below cases:
- Motor Vehicles and other conveyance except when they are used for the following:
- Further supply of such vehicles or conveyances; or
- Transportation of passengers; or
- Imparting training on driving, flying, navigating such vehicles or conveyances
- For transportation of goods
- Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, but if the goods and/or services are taken to deliver the same category of services or as a part of a taxable composite or mixed supply, credit will be available.
- Membership of a club, health and fitness center.
- Rent-a-cab, life insurance and health insurance except where
- Government makes it obligatory for employers to provide it to its employees; or
- goods and/or services are taken to deliver the same category of services or as a part of a composite supply, credit will be available.
- Travel benefits extended to employees on vacation such as leave or home travel concession.
- Works contract service for construction of immovable property except for plant & machinery or for providing further supply of works service
- Goods and/or services for construction of an immovable property except for plant & machinery whether to be used for personal or business use.
Note:Construction includes reconstruction, renovation, additions or alterations or repairs to the extent of capitalization, to the said immovable property.
- Goods and/or services or both where tax has been paid under composition scheme.
- Goods or services or both received by a non-resident taxable person except on goods imported by him.
- Goods or services or both used for personal consumption.
- Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
- ITC will not be available in the case of any tax paid due to non-payment or short tax payment, excessive refund or ITC utilized or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.
Also, there is a time limit for utilizing the Input tax credit. A registered person shall not be entitled to take input tax credit in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply.
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(This article is authored by Waquar Ansari exclusively for publication at StartUp Movers. No content of this article can be published elsewhere without prior permission of StartUp Movers.The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation.)