Central Goods and Services Tax (Amendment) Act, 2018 (hereinafter referred as the act) came into effect from 01st February, 2019. Section 17 which deals with "Apportionment of Credit and Blocked Credits" has been amended, however Section 17 of the act is NOT effective from 01st February, 2019. Section 17 will be effective from the date to be notified by the government. Let's have an overview of the Amendment of the Section 17 w.r.t. substitution of clauses (a) and (b) in sub-section 5.
First for clause (a) of sub-section 5 of Section 17, earlier it was referring to "Motor Vehicles and Other Conveyances" however as per amended act it refers to "Motor Vehicles for Transportation of Persons, Vessels and Aircraft" in a very discrete manner. Now, clause (a) specifically deals with "Motor Vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver)" as a result if the Motor Vehicle under consideration is for transportation of persons having approved seating capacity of more than thirteen persons is out of the ambit of these restrictions.
Earlier, if the Motor Vehicle was used for transportation of goods credit was available but now we have to re consider the situation if the Motor Vehicle under consideration is having approved seating capacity of less than thirteen persons, as transportation of goods is excluded from the exceptions for availing Input Tax Credits. Clause (aa) of sub-section 5 provides for Vessels and Aircraft for which Input Tax Credit can be availed if they are used for further supply of those goods, for transportation of goods and passengers or for imparting training on flying/navigating such aircraft/vessel.
Further to clear the doubts regarding availing Input Tax Credits with respect to services of general insurance, servicing, repair and maintenance of motor vehicles, vessels and aircraft as referred to in clause (a) and (aa), Clause (ab) has been inserted which provides that if motor vehicle, vessel or aircraft has been used for the permitted purposes, Input Tax Credit for such services will be available as well. Thus, if the motor vehicle is ineligible for availing Input Tax Credit, Input Tax Credit in respect of general insurance, servicing, repair and maintenance of such motor vehicle will also be ineligible.
Now, let's observe the changes made in clause (b) of sub-section 5, one major change with respect to Input Tax Credit of food and beverages or outdoor catering is that, one would be eligible to avail Input Tax Credit of such food and beverages or outdoor catering services if such goods or services are further supplied as an element of a taxable composite or mixed supply. Understanding it with a case study, say company ABC Ltd. has organised a seminar along with complimentary lunch for some consideration let's take it as Rs.500/-, for this, outdoor catering services is being availed by ABC Ltd. In this case ABC Ltd. will be eligible to avail Input Tax Credit on the outdoor catering services as such services are further supplied as an element of a mixed supply. Let's take one another case, ABC Ltd. has arranged for outdoor caterer for providing requisite services at the annual general meeting of the company, in this very case ABC Ltd. not supplying any of such services as an element of mixed or composite supply, hence in this case Input Tax Credit of out-door catering services will not be available.
Second major change with respect to clause (b) is that, a proviso has been inserted which provides for eligibility of Input Tax Credit of all such goods and services mentioned in clause (b) where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. Earlier government had just issued a clarification in this regard via press release now it has been incorporated in the act itself.