Section 17(5) – Blocked Credits under GST

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Section 17(5) - Blocked Credits under GST

Section 17(5) – Blocked Credits under GST

ITC of tax paid on almost every inputs and input services used for taxable
supply of taxable goods or services or both is allowed under GST. However, if you are a manufacturer, wholesaler, agent, e-commerce operator registered under GST, then you are also eligible to claim the Input tax credit for the tax paid on purchase except a small list of items provided under u/s 17(5) of CGST rule.

Provisions under u/s 17(5):

List Given under this section can be explained as under:
Motor vehicles and other conveyances apart from when they are used–
for transporting the goods; or for making the following taxable supplies, namely for further supplying such vehicles or conveyances; or transporting the passengers; or imparting training on driving, navigating, flying such vehicles or conveyances;

The following supply of goods or services or both:

A. Food and Beverages, beauty treatment, cosmetic and plastic surgery, health services, outdoor catering, 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 element of a taxable composite or mixed supply;

B. Membership of a club, health and fitness centre;

C. rent-a-cab, life insurance and health insurance except where

  • The Government notifies the services which are obligatory 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 or both of particular categories 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

D. Travelling benefits extended to employees on vacation such as leave or home travel concession;

E. Works contract services when supplied for construction of immovable property (other than plant and machinery) except where it is an input service for the further supply of works contract service;

F. Goods or services or both received by a taxable person for construction of immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

G. Inward supplies on which tax has been paid under Composition scheme.

H. Inward supplies received by Non Resident taxable person except goods imported by him.
Eg .Goods imported by Non-resident taxable person is chargeable under customs which includes IGST paid by him, credit of which is available to Non-resident taxable person.

I. Goods or services used for personal consumption.

J. Goods that are lost, stolen, destroyed, written off, or disposed of by way of free samples or gift.

K. A registered person shall avail no input tax credit in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed or account of any fraud, willful misstatement or suppression of facts.

Thus, After the implementation of GST, the tax compliance requirement changes and section 17(5) of the Act restricts certain credit which is explained as above.

Shrutika Jain (CA – Final)

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