Blocked Input Tax Credit under Section 17(5)
Blocked Input Tax Credit under Section 17(5)
The Goods and Services Tax Act, 2017, also known as the GST Act, is the consolidated legislation on indirect tax in India. The GST Act recognizes several concepts which are fundamental to the indirect tax regime in India. One such concept is input tax credit under GST or ITC GST.
Section 16 recognises the concept of ITC GST. ITC GST is the entitlement of every taxable person to claim credit of the ITC GST paid by it on the purchases of goods and services if such goods and services are used or intended to be used in the further course of its business.
While Section 16 provides for the general entitlement to claim ITC GST, Section 17 recognises the exceptions to the claim of ITC GST and is often referred to as blocked input credit, or blocked ITC GST or blocked credit under GST. This blogpost focuses on the circumstances of blocked ITC GST.
A blocked input tax credit is the inability of a taxable person under Section 17 of the GST Act to claim an input tax credit under the GST regime. The blocked credit under GST is defined by the list of impermissible activities provided under Section 17(5) of the GST Act which was amended by the Act of 2018 which came into force from 1st February 2019 provides for an elaborate list blocked tax credit activities.
Following is a comprehensive tabulated list of activities on which input tax credit is blocked:
| Types of activities within the ambit of blocked ITC GST | Exceptions: |
| 1. Motor vehicles used for transportation of persons and having a seating capacity of not more than 13 persons (including the driver)
2. Vessels and aircraft |
1. when used for making the following taxable supplies:
a) a further supply of such motor vehicles; or b) transportation of passengers in case of passenger moto vehicles and transportation of goods in case of vessels and aircraft; or c) imparting training on driving such vehicles 2. the taxable person is engaged in the manufacturing of the motor vehicles vessels or aircraft or the supply of general insurance in respect the of motor vehicles, vessels or aircraft. 3. Leasing, renting or hiring of motor vehicles, vessels or aircraft if used for the above purposes.
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| Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft for activities other than those permitted.
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Input tax credit in respect of such goods or services or both is available where an inward supply of such goods or services or both is used for making outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply.
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| Membership of a club, health and fitness centres.
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| Travel benefits which extended to employees on vacation such as leave or home travel concession.
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Travel benefits are provided in the fulfilment of statutory obligations of an employer.
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| Works contract services supplied for construction of immovable property. | 1. Works contract services for the construction of plant and machinery
2. Works contract services provided as an input service for the further supply of works contract service. |
| Goods or Services or both received for the construction of an immovable property on his account even when it is used in the further course of business.
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Goods or Services or both received for the construction of plant & machinery on his account even when it is used in the further course of business. |
| Goods or Services or both on which tax under a composition scheme provided in Section 10 of the GST Act has been paid.
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| Goods or Services or both used for personal consumption
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| Goods lost, stolen, destroyed, free samples, gifted, or written off
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| Any tax paid under Section 74, Section 129 or Section 130 of the GST Act. |
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