Expenses on which Input Tax Credit should not be availed in GST
GST has been the most revolutionary improvement in the Indian business space. The concept of One Nation One Tax has allowed seamless movement of goods across the country. The most appreciated aspect of the GST has been the allowability of Input tax credit for indirect taxes paid for all sorts of inputs, capital goods, and expenses incurred in day-to-day business activities, which was not available during the times of VAT, excise, and service tax regimes. However, certain cases have been specifically excluded for the availing of the input tax credit of GST paid on such items. Such cases are herein listed below.
- Motor Vehicles & Conveyances
- ITC is not available on the purchase of bikes, scooters, cars, vessels, or aircraft.
Exceptions
ITC will be available if the given vehicle is being used for
- Supply of other vehicles, conveyances, vessels, or aircraft.
- Transportation of passengers
- Training to drive such vehicles, conveyances, vessels, or aircraft.
- Transportation of goods
- Food, beverages, Cosmetics, etc.
ITC under GST cannot be claimed for:
- Food and beverages
- Outdoor catering
- Beauty treatment
- Health services
- Cosmetic and plastic surgery
Exceptions
- ITC will be available if the purchase and sale are for the same category of goods.
- Services of general insurance, servicing, repair, and maintenance
- ITC is not available for GST paid on insurance and repairs and maintenance of vehicles.
Exceptions
An expense incurred by a taxable person engaged:
- In the manufacture of such motor vehicles, vessels or aircraft; or
- In the supply of general insurance services in respect of such motor vehicles, vessels, or aircraft insured by him
- Sale of membership in a club, health, fitness center
- ITC is not available on taxes paid for any membership fees for gyms, clubs, etc.
- Rent-a-cab services, life insurance, health insurance
- ITC is not available for rent-a-cab, health, and/or Life insurance
Exceptions:
- The Government notifies the services which are mandatory for an employer to provide to its employees under any law for the time being in force; or
- Such inward supply of goods or services of a particular category is used for making an outward taxable supply of the same category of goods or services or as part of a taxable composite or mixed supply.
- Travel Expenses
- ITC is not available on expenses incurred for travel of employees on vacation such as leave or home travel concession.
Exceptions:
- In cases where taxes are paid for Business travels, the given person is eligible to claim ITC.
- Works contract
- ITC cannot be on expenses like Works Contract services for example construction of the immovable property.
Exceptions:
- ITC is available in cases where the input service is used for further work contract services.
- Goods or services purchased for construction of an immovable property
- ITC is not available for GST paid for the purchase of inputs to be used in the construction of immovable property.
Exceptions:
- ITC is available on inputs used to manufacture plant and machinery for own use.
- GST paid under Composition Scheme
- ITC is not available when inputs are billed under the composition scheme
- Expenses for Personal use
- ITC is not available for goods/services consumed for personal use.
- Free samples and destroyed goods
- ITC is not available for goods lost, stolen, destroyed, or given without consideration or as samples of gifts.
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