13 Jul 2019Posted By: Mudit Handa

10 Cases where GST ITC is Not Available

GST is indeed an incredible tax reform that has enhanced the ease of doing business in India. The most remarkable feature in the Goods & Service Tax laws is of Input Tax Credit, wherein the person having GST registration can easily claim the Input credit of the GST paid on the purchase of raw material. The ITC can be adjusted with the GST liability that arises while making sales,

However, there are certain cases where the Input Tax Credit can’t be availed by the registered person. Let’s have a look at all those Goods & Services where ITC is not available.

#1. Motor vehicles

ITC is only available if the vehicle is used for the following purposes:

  1. Car dealership

If you are in the business of automobile dealership then ITC will be available.

For example, a car dealer having GST registration buys a car for ₹50 lakh plus ₹14 lakh GST. The car was sold later on for ₹70 lacs along with ₹19 lacs GST. 

He can now claim ITC of ₹14 lacs and pay only ₹5.6 lacs (19.6 – 14).

  1. Tour & travels

If you are in Tour & travels business then ITC will be allowed on the vehicles purchased.

  1. Driving training

If you are running a driving school having GST registration and providing training to the beginners, you can claim ITC on the GST on such cars.

  1. Goods Transit

ITC is available on commercial vehicles used for transportation of goods. However, ITC is not allowed on goods transport agencies (GTA).

#2. Food & Catering services

ITC is not available in case of following goods & services:

  • Food & beverages

  • Outdoor catering service

  • Beauty treatment

  • Healthcare services

  • Cosmetic & plastic surgery

Note: ITC is available if the goods or services fall under the category of a mixed or composite supply under GST law.

#3. Club membership

ITC is not allowed on any membership fees for clubs, spas, gyms and yoga classes, etc.

#4. Works contract

ITC shall not be available in case of work contract services. Input Tax Credit for the construction of immovable property cannot be claimed, except where such service is used for further work contract services.

Know more about GST on works contract.

#5. Construction of immovable property on own site

At the 34th GST Council meeting, the Government had introduced new GST rates on the Real estate which are 5% and 1% on affordable housing. Here, ITC is not available for goods & services for the construction of an immovable property on own site. Even if such goods and services are used in the course or furtherance of business, ITC shall not be available.

However, this does not apply to plant or machinery. ITC is available on inputs used to manufacture plant and machinery for own use.

To know how GST Input Credit can be claimed in Real estate projects, 

#6. Composition Scheme

ITC can’t be claimed by a person having GST registration under composition scheme.

#7. NRIs

ITC shall not be available to a non-resident taxable person (NRI) buying goods & services in India. However, ITC is available on any goods imported by an NRI.

#8. Own consumption

No ITC is available for the goods or services bought for personal consumption.

#9. Free samples

No ITC is available for goods given as free samples. Read more.  

#10. Restaurants

The restaurants shall charge GST @ 5% but cannot avail any input credit.

However, ITC is available for restaurants inside the hotels where room tariffs exceed ₹7,500 and on which GST @18% is charged.

So, these are the important cases where GST ITC is not available.

In case you need any sort of guidance in relation to GST registration, please feel free to contact our business advisor at 8881-069-069.

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