As per sub-section (1) of section 16 of CGST Act,2017 every registered person is entitled to take credit of tax paid on input supply of goods or service or both which are used or intended to be used in the course or furtherance of his business. Also under sub-section (2) of section 18 of CGST Act, 2017 there are four special circumstances (such as newly registering person under CGST Act or changing from Composition scheme to normal scheme can take credit of input tax on stock) under which a person is eligible to take credit of input tax.
In this article we will be discussing that as per sub-section (5) of section 17 of CGST Act, 2017 there are twelve situations under which a registered person cannot take credit of input tax, which we call as Blocked Credits.
Twelve different circumstances under which input tax credit is not available
- Purchase of motor vehicles and other conveyance except if it is purchased for further supply or transportation of passenger or for imparting training on driving, flying and navigating.
- Availing Supply of food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except if the registered person is making outward supply of same category of goods or service.
- Payment towards membership of club, health & fitness centre.
- Availing service of rent-a-cab, life insurance and health insurance except if it is mandatory by any law for the employer to provide this service to its employee or if the registered person is making outward supply of same category of service.
- Expenditure on any travel benefits given to employees on vacation, such as leave or home travel concession.
- Services of works contract availed for construction of an immovable property except where it is an input service for providing further supply of works contract service.
- Goods or service or both received for construction of immovable property on own account
- Goods or service or both received from composition scheme person.
- Goods or service or both received by a non-resident taxable person except on goods imported by him.
- Goods or service or both used for personal consumption.
- If foods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
- Goods or service or both on which tax is paid on account of Detention, seizure, confiscation or willful-misstatement or suppression of facts.
With reference to above point (6) & (7) Construction also includes re-construction, renovation, additions or alteration or repairs, to the extent it is capitalized.
With reference to above point (6) & (7) immovable property does not include apparatus, equipment, and machinery fixed to earth by foundation or structural support but immovable property includes the following
- Land, building or any other civil structures
- Telecommunication towers and
- Pipelines laid outside the factory premises.
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