Blocked Credits (ITC) under GST - Section 17(5)
Blocked Credits (ITC)
A registered person shall not be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless:-
(1) He is in possession of a GST invoice or debit note issued by a supplier.
(2) He has received the goods or services or both.
(3) The GST charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit.
(4) He has furnished the GST return.
A registered person is not eligible to take input tax credits on GST paid on specify goods and services received by him under Section 17 (5) blocked credit of CGST Act. It refers to the ITC not available(Blocked credit) on certain type of goods and services specified U/s 17(5) in CGST act.
| Nature of supply | ITC Not Available (Blocked Credit) | ITC available on the followings (Exception) | Practical Example |
| Motor Vehicle and other conveyance including Vessel and Aircraft. U/s 17(5) Blocked credit |
(1) ITC not available on Motor vehicles U/s 17(5) Other conveyances and related services (insurance, servicing, repair and maintenance) (2) ITC not available on Vessel and Aircraft U/s 17(5) (3) ITC not available on services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft U/s 17(5) |
ITC available when Motor Vehicle and other conveyance or Vessel and Aircraft used for
|
A Dealer of car, purchase of car and Sale of car than ITC available on car. A Restaurant, purchase of car and providing restaurant service than ITC not available on car. |
| Motor Vehicle and other conveyance including Vessel and Aircraft. U/s 17(5) Blocked credit | ITC not available on services of leasing, renting or hiring of motor vehicles, vessels or aircraft U/s 17(5) |
Except when used for the purposes specified therein above. |
A Cab service provider, receives cab on rent and gives cab on rent than ITC available on cab. (Sub-Contracting) But if a coaching service institute, providing coaching service receives cab service on rent than ITC not available on such cab. |
| Supply of food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, life insurance and health insurance. U/s 17(5) Blocked credit | ITC Not Available U/s 17(5) |
ITC would be available where an inward supply of such goods or services 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 |
A Dealer of beverages, purchase of beverages and sale of beverages than ITC available on beverages. But if Coaching Institute provides coaching service and purchases beverages then ITC is not available on beverages. |
| Memberships of club, health and fitness center. U/s 17(5) Blocked credit | ITC Not Available U/s 17(5) | A Supplier of goods get club membership for its directors than ITC not available. | |
| Travel benefits extended to employees on vacation such as leave or home travel concession. U/s 17(5) Blocked credit |
ITC Not Available U/s 17(5) |
Provided that the ITC in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force | Travel benefits extended by the company to employees than ITC will not be available. |
| Works contract services when supplied for construction of an immovable property (other than plant and machinery). U/s 17(5) Blocked credit | ITC Not Available U/s 17(5) | ITC would be available where it is an input service for further supply of works contract service | A Builder contractor, get construction service and provide construction service (Works contact) than ITC available on construction service.(ITC is available when work contract service is input service for further supply of works contract Service) |
| Goods or services or both received by a taxable person for construction of an 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. U/s 17(5) Note-1 (Explanation) | ITC Not Available U/s 17(5) | A Builder contractor, purchase of building material and get architect service and provide construction service (Works contact) then ITC available on building material and get architect service . | |
| Goods or services or both on which tax has been paid under section 10 (Composition Scheme). U/s 17(5) Blocked credit | ITC Not Available U/s 17(5) | ||
| Goods or services or both received by a non-resident taxable person. U/s 17(5) Blocked credit |
ITC Not Available U/s 17(5) |
ITC available on goods imported by him. | |
| Goods or services or both used for personal consumption. U/s 17(5) Blocked credit | ITC Not Available U/s 17(5) | ||
| Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. U/s 17(5) Note-2 (Explanation) | ITC Not Available U/s 17(5) | ||
| Any tax paid in accordance with the provisions of sections 74, 129 and 130 (Recovery Sections). U/s 17(5) Blocked credit | ITC Not Available U/s 17(5) |
Explanation
Note-1 : The expression "construction" includes reconstruction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.
Note-2 : ITC in the hands of the supplier in respect of sales promotional schemes- Circular No. 92/11/2019 GST dated 28.03.2019 has clarified the entitlement of ITC in the hands of supplier in respect of various sales promotional schemes as following:-
A. Samples and free gifts
Samples which are supplied free of cost, without any consideration, do not qualify as "supply" under GST, except where the supply is covered under Schedule I of the CGST Act.
ITC shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration. However, where the activity of distribution of gifts or free samples falls within the scope of "supply" on account of the provisions contained in Schedule I of the CGST Act, the supplier would be eligible to avail the ITC.
B. Buy one get one free offer
This type of supplies include two or more individual supplies where a single price is being charged for the entire supply. Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of CGST Act.
ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.
C. Discounts including "Buy more, save more" offers
Discounts offered by the suppliers to customers (including staggered discount under "Buy more, save more" scheme and post supply / volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the condition of section 15(3), including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document issued by the supplier.
Note-3 :Motor vehicles:- It refers to Motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver).
Apportionment of credit (ITC)
| Use of goods and services | ITC available |
| Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes. | The amount of ITC credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. |
| Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies. | The amount of ITC credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies |