INELIGIBLE INPUT TAX CREDIT UNDER GST REGIME
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 17-4-2017
Section 17(5) of the Central Goods and Services Act, 2017 provides that input tax credit in respect of the following shall not be available-
(a) motor vehicles and other conveyances except when they are used-
(i) for making the following taxable supplies, namely-
(A) further supply of such vehicles or conveyances; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods;
(b) the following supply of goods or services or both-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an 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 an
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
chinery) on his own account including such goods or services or both are used in course of furtherance of business;
(e) goods or services or both on which tax has been paid under Section 10 (Composition scheme);
(f) goods or services or both received by a non resident taxable person except on goods imported by him;
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(i) any tax paid in accordance with the provisions of Section 74, 129 and 130-
* Section 74 provides for the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of fact;
* Section 129 deals with the detention, seizure and release of goods and conveyances in transit and the tax paid in this procedure;
* Section 130 deals with the confiscation of goods or conveyances and levy of penalty
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
des that input tax credit shall not be available for certain categories. Some of the provisions of Rule 2(l) of CENVAT Credit Rules, 2004 are incorporated in Section 17(5) of the CGST Act, 2017.
Rule 2(l) of CENVAT Credit Rules, 2004 defines the term 'input service'. This term excludes certain services that means that such services are not eligible to take and utilize CENVAT credit which are as below-
* service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (specified services) in so far as they are used for –
* construction or execution of works contract of a building or a civil structure or a part thereof;
* laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or
[Section 17(5) (c) of CGST Act provides that the works contract services when supplied for construction of an immovable property,
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
hen such services are used primarily for personal use or consumption of any employee.
* [Outdoor catering, beauty treatment, health services, cosmetic and plastic surgery are declared as ineligible input tax credit vide Section No. 17(5)(b) (i).Howeverwhere an 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 an element of a taxable composite or mixed supply.The particular category is to be prescribed by the Government.
* Membership of a club, health and fitness centre, life insurance services are not eligible in GST regime also vide Section 17(5)(b)(ii);
* Travel benefits extended to employees on vacation such as Leave or Home Travel Concession, services are also made ineligible for input tax credit vide Section 17(5)(b)(iv);
* Life insurance, health insurance is also made ineligible for input tax credit.However exceptions are there in t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof;
(vii) storage tank and
(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis, but including dumpers and tippers
used-
(1) in the factory of the manufacturer of the final products; or
(1A) outside the factory of the manufacturer of the final products for generation of electricity or for pumping of water for captive use within the factory; or
(2) for providing output service;
(B) motor vehicle designed for transportation of goods including their chassis registered in the name of the service provider, when used for-
(i) providing an output service of renting of such motor vehicle; or
(ii) transportation of inputs and capital goods used for providing an output service; or
(iii) providing an output service of
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
expect that litigation may be less since the definition is very clear.
Input
Rule 2(k) of CENVAT credit defines the term 'input' as-
(i) all goods used in the factory by the manufacturer of the final product; or
(ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or
(iii) all goods used for generation of electricity or steam or pumping of water for captive use; or
(iv) all goods used for providing any output service; or;
(v) all capital goods which have a value up to ten thousand rupees per piece,
but excludes-
(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;
(B) any goods used for –
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods,
except for
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
tended to be used by a supplier in the course of furtherance of business. Thus this definition on 'inputs' removes the restrictions and hindrances put forth in the definition of 'input' in Rule 2(k) of CENVAT Credit Rules, 2004 and litigation will be very much reduced.
Conclusion
The definition of the term 'capital goods', 'inputs' and 'input services' is clear without giving place for interpretation as in the case of CENVAT Credit Rules. The only condition to observe is that the goods or services are used or intended to be used for the furtherance of business. Even though some categories mentioned in Section 17(5) (a), (b), (c) and (d) are not eligible to take input tax credit but if they are used for furtherance of business or some activities. The taking of input tax credit in GST regime is having no complex when comparing the CENVAT Credit Rule regime.
Reply By Sanketh Meri as =
Dear Sir,
The major issue under GST on capital goods definition is majorly pertaining to the word &
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
and machinery in clause c and plant or machinery in clause d.
Whether it is clear now that input tax credit of construction material like steel and cement used for construction of plant in the course or furtherance of business is available to the assesse.
Whether input tax credit of any type of construction work (service) and material used for repairing ( not capitalized) of plant in the course or furtherance of business is available to the assesse.
Sir, you are highly learned person in this regard and hope to receive the guidance.
Thanks
Jaiprakash Ruia
Dated: 18-4-2017
Reply By chintan shah as =
sir i manufacturer chocolates and companies buy it from me for sales promotion as gifting. can the company buying the chocolate take input credit for their purchase of chocolates?
Dated: 23-6-2017
Reply By Pradeep Dadhich as =
Sir,
My Client is Constructing a Hotel building, whether we will get input tax credit of material used in constructing the Hotel Building like Cement,
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
