11 goods and services on which ITC under GST is not available to the taxpayer – Nonavailability of ITC in certain cases

 

1.0 Introduction

Input tax credit is not a new concept for registered Taxpayers. ITC is available to everyone who is registered under GST. For your purchases, you can claim ITC for the tax paid by you. These purchases include all types of goods, however, there are some goods and services where you cannot claim ITC for them.

We will be discussing these goods and services today. Every registered taxpayer must know the list. With anarchy of return filing, everyone is getting confused hence this article is written to provide some relief by educating you about ITC.

 

2.0 What is input tax credit (ITC)?

In very simple words, input tax credit (ITC) is the tax paid by you for your purchases. It applies to manufacturers, traders, e commerce operator and supplier for the amount paid by them for their purchase for the business. ITC is not available for personal purchases of the taxpayer.

For Eg, you are a show-maker and brought raw material for making shoes. You paid Rs.5000 (including taxes) for the raw material, then later you can claim for ITC on the taxes you paid for your purchase (5000). The tax paid by you is adjusted with the tax you have to pay

 

3.0 Restrictions on input tax credit (ITC)

 There are certain restrictions or limitation on input tax. See the following list

• No input tax credit will be available where tax paid by demand of fraud, willful misstatement or suppression of facts
• No input tax credit for the purchases by a taxpayer for personal consumption
• Works contract services
• Good, services or both received by a taxable person for construction of immovable property
• A person under composition scheme cannot claim for input credit even if the purchases were for business only.
• Goods lost, stolen, destroyed, written off or disposed of by way of gifts or free samples.

 

4.0 Services and goods on which ITC not available

The following are the 10 goods and services where the taxpayer cannot claim for input tax credit (ITC):

 

#Item No.1 – Nonavailability of ITC on Motor vehicles under GST

In case of motor vehicles, ITC will not be available to the registered taxpayers under GST. E.g. a manufacturer of leather, purchases a lorry for internal transport. The ITC of the lorry shall not be available.

However, there are some cases in which the ITC on motor vehicles shall be available which are as follows:

• Transportation of good
• Transportation of passengers
• Providing training or driving
• Transporting vehicles.
• Used in normal course of business (e.g. car dealer)

 

#Item No.2 – Nonavailability of ITC on Food and beverages

In case of food and beverages, ITC will not be available to the registered taxable person under GST. E.g. a chartered accountant firms spending on snacks for employees, the ITC on the same shall not be available.

However, the ITC shall be available when a taxable person is using an inward supply and is making an outward supply of the food and beverages. E.g. a dealer of beverages shall be allowed the ITC on beverages.

 

#Item No.3 – Nonavailability of ITC on Outdoor catering

The ITC on outdoor catering shall not be allowed to the registered taxable person, however, it shall be allowed if the catering services are being used by any other catering service provider.

E.g. Mr. A, an outdoor caterer sub contracts a work to Mr. B, another outdoor caterer. In this case, Mr. A shall be allowed to take the ITC on the bill raised by Mr. B.

 

#Item No.4 – Nonavailability of ITC if goods or services are used for personal consumption

If any registered taxable person uses the goods or services for personal consumption, then the ITC on those particulars goods or services shall not be available.

E.g. A employers buy furniture for his home shall not be available.

 

#Item No.5 – Nonavailability of ITC on Beauty treatments  

All beauty treatments are also not eligible for ITC to be claimed on the same except when they are received by the supplier who is also dealing in beauty treatment services.

 

#Item No.6 – Nonavailability of ITC on Health services

All health services except when a registered person is using an inward supply and is making an outward supply of the same category.

 

#Item No.7 – Nonavailability of ITC when goods are supplied as free samples

If goods are supplied as a free sample for advertisement purposes or for any other purpose, the ITC in respect of those goods shall not be available.

 

#Item No.8 – Nonavailability of ITC on Cosmetic and plastic surgery

All cosmetics and plastic surgery except when a registered person is using an inward supply and is making an outward supply of the same category i.e. Cosmetic and plastic surgery services.

 

#Item No.9 – Nonavailability of ITC on Member of a club, health or fitness center

The membership of a club health or fitness club cannot be availed under GST. E.g. the GST charged on Gym fees shall not be allowed as ITC under GST.

 

#Item No.10 – Nonavailability of ITC on rent cab services, Life insurance & health insurance

The ITC on rent cab services, life insurance services or health insurance services shall not be available except in the following cases:

• The Government notifies the services which are obligatory for an employer to provide to its employees under any law.

• Such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply.

 

#Item No.11 – Nonavailability of ITC on Travel benefits

The ITC on travel benefit extended to employees on vacation such as leave or home travel concession shall not be available.

 

5.0 Conclusion

If you have any query regarding the ITC or need any consultancy for the same, please email us info@hubco.in.