Input tax credit is not available if reflecting in our GSTR-2A ?

As the GST has been introduced in 2017, the main objective was to eliminate the cascading effect i.e. tax on tax by providing input tax credit on the every purchase of goods and services which has been used in the course or furtherance of business as per the conditions specified under section 16 of CGST Act, 2017.

Also, as we know that input tax credit will reduced the cost of goods and services and it will help taxpayer’s to reduce his outward tax liability that has been arise at the time of supply by utilising these input tax credit.

But in GST law, all input which are available and reflecting in GSTR-2A is not eligible input and it can not be availed and utilised against the outward tax liability. In other words, sub section (5) of section 17 of CGST Act, 2017 as amended by CGST Amendment Act, 2018 specifies the goods and services against which input tax credit is not available even if these are reflecting in our GSTR-2A. These input is called “Blocked Credit”.

Let’s have a look on the blocked credit according to his major heading i.e. against which no input tax credit is available.

The following is the services has been description of these blocked credit.

Input tax credit not available for specified goods and services	Exception i.e. Input tax credit available subject to certain conditions
A. Motor Vehicle  Used for transportation of persons  Having seating capacity not more than 13 person(including driver)	Input tax credit is available if used for:  Further supply of such motor vehicles i.e. car dealer, automobile companies; or Transportation of passenger i.e. UBER, OLA etc.; or Imparting training on driving such motor vehicles i.e. driving schools
B. Vessel and aircraft	Input tax credit is available if used for: Further supply of such vessels or aircraft; Transportation of passengers i.e. Indigo, Air India etc. Imparting training on navigating such vessels; or Imparting training on flying such aircraft i.e. training schools
Services of General insurance, servicing, repair and maintenance related to such motor vehicle, vessels and aircraft	Input tax credit is available if used for: Used for purposed specified above in point A and B (exceptions) Taxpayer engaged in manufacturing of such motor vehicles, vessels and aircraft or Taxpayer engaged in supply of general insurance services in respect of such motor vehicle, vessels or aircraft insured by him i.e.manufacturer of such motor vehicle is eligible to take ITC on insurance premium.
C. Individual related services Food and beverages, beauty treatment, health services, life insurance, health insurance, renting of motor vehicle, aircraft and vessels  Member ship of a club, health and fitness centre and travel benefits extended to employees on vacation such as leave or home travel concession.	Input tax credit is available: When an inward supply of such goods or service or both 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. Input tax credit is available if is it obligatory for an employer to provide such goods or services to its employee under any law for the time being in force.

D. Work contract service For Construction of an immovable property	Input tax credit is available if: Work contract service used for plant and machinery or For further supply of work contract service
E. Construction of an immovable property:       Goods or services or both for construction of immovable property on his own account        Goods or services or both are used for furtherance of business.	Input tax credit is available if: Construction of immovable property used for plant and machinery Example: Cement base for towers, advertisement pole etc.
F. Composition Scheme Input tax credit is not available if any goods or service or both received under which tax has been paid under section 10 i.e. on composite rate of tax.	No such exception
G. Non-Resident  any goods or services or both received by a non-resident taxable person Input tax credit is not available because he is not registered under GST Act, 2017.	Input tax credit is available: On the goods imported by him and he take  temporary GST registration under GST Act,2017
H. Personal Consumption Any goods or service or both used for personal consumption, input tax credit is not available because condition for availing input tax credit i.e. for furtherance of business is not satisfied.	No such exception
I. Goods lost, Stolen, damaged, disposed off, gift or free sample: No input tax credit available if any of the above circumstances happened because in these cases there will be no outward supply from these goods which has been lost, stolen, disposed-off etc.	No such exception
J. Any tax paid under Section 74, Section 129, Section 130 of CGST Act,2017	No such exception

There are some important ruling and case laws in respect of above goods or service or both. These are as follow:

• Mohana Ghosh, In re (AAR-West Bengal): Under this input tax credit is not available for purchase of motor vehicle for supplying Rent-a-Cab service.

• Advance Ruling: Chowgule industries (P) Ltd. 2019 taxmann,in 293 (AAR, Goa): Input Tax Credit is available for motor vehicle purchase as demo Vehicle for promotion of sale by providing trial run to customer and capitalised in books of account.

• CMS Infor System Ltd. In re (AAAR)2018: Under this input tax credit is not available for purchase of vehicle for transportation of cash.

• Nipha Exports (P) Ltd. in re to AAR (West Bengal): Under Individual related service at point C in the above table, Input tax credit is available only in respect of  rent-a cab, life insurance and health insurance service if is it obligatory for an employer to provide such goods or services to its employee under any law for the time being in force.

• Maruti Ispat and Energy P Ltd. In re (AAR-AP).2018.: Under the Construction of immovable proper at point E in the above table ,input tax credit is not available for shed to protect plant and machinery as it is civil structure.

• Polycab Wires (P) Ltd., in re to AAR-Kerala)2019.: Input Tax Credit is not available for free supply of goods against CSR policy.

• Sanofi India Ltd., In re [2019] (AAR – Maharashtra).:Input Tax Credit is not available for free supply of goods for brand promotion or sales promotion.

Synopsis:

Under GST, for availing input tax credit subject to section 17(5), some of the basis conditions are as follow:

• Invoice has been received(invoice is mandatory)
• Goods or services or both has been delivered/received
• Tax on sale has been paid by supplier
• Invoice should be reflection in GSTR-2A
• Payment has been made within 180 days from the date of invoice
• use or intend to use for business purpose
• Outward supply should be non-exempted
• Claimed either input or depreciation etc.

 

For more useful updates please visit and follow https://taxtunnel.blogspot.com/

----------------------------------------------------------------------------------------------------------------------------

For any tax related issues/queries:

Please Contact:

Tax Tunnel

📱 +91-78382 12620

📱 +91-85878 18830

📧tunneltax@gmail.com