Blocked ITC on Various Services

Blocked ITC on Various Services

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Blocked ITC on Various Services

Last month to claim Input Tax Credit if not claimed or Reverse the same if taken wrongly earlier!

Goods and Services Tax (GST) is an indirect taxation reform whose burden can be passed on. To pass the burden an individual needs to take credit on the inputs. Whether input tax credit of all goods and Services on which GST is levied is available? The answer is no. Section 17(5) of CGST Act 2017 has blocked various credits in respect of whom ITC cannot be availed. If ITC is taken on this Block Credits it will attract penal provisions.

In this Article we will discuss about block credits on various day to day expenses. There are few expenses that are incurred frequently but the credit on same is not available:

  1. GST on supply of following Goods and Services shall not be available

GST credit is not available on supply of

  • Food and Beverages
  • Outdoor Catering
  • Beauty Treatment
  • Health Servicers
  • Cosmetic and Plastic Surgery

The credit of such services and goods are not available because it is very difficult to assure whether such Goods are Services are taken for personal purpose or business purpose.

This is hardship on those who are actually working in the respective industry. Therefore, exception is provided such that the credit is available to person dealing in same category of Goods or Service as mentioned above or are indulged in outward supply this Goods or Services as a element of Taxable composite or mixed supply.

For Example,

Credit of Food purchased by an IT company for employees will not be available as credit to the company. On the similar lines if food is purchased by restaurants (for any purpose) the credit will be available to them.

Similarly, credit of Beauty Treatment Services will not be available to individuals in normal sceneria but shall be available if person is in further supply of beauty services.

  1. GST on Membership of Club, Health and Fitness centre shall not be available.

If an employer gets his employee registered with the Clubs, Health or fitness centre the credit will not be available even if same is treated as perquisites in hands of employee in Income Tax.

  1. GST on Rent a cab, Life Insurance and Health Insurance Services shall not be available as it seems to be personal in nature. Therefore, if an employer gives his employee the service of cab for coming and leaving the office the credit will not be available.

The exceptions as in point 1 are also available here. The exceptions are as follows:

  • Where it is notified by the Government as obligatory for an employer to provide to its employees under any law for the time being in force to provide such services. For example the employer needs to do compulsory insurance of his employees working at mills.
  • 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; and
  1. Travel benefits to employees on vacation i.e. leave or home travel concession.


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