Supply of goods and services ineligible for ITC – Negative list :
Though definition of input tax is broad, input tax credit shall not be available in respect of the following, as per section 17(5) of GST Act.
Motor vehicles and other conveyances – Motor vehicles and other conveyances are not eligible for ITC except in following cases – (i) for making the following taxable supplies, namely—(A) further supply of such vehicles or conveyances (B) transportation of passengers (C) imparting training on driving, flying, navigating such vehicles or conveyances (ii) for transportation of goods – section 17(5)(a) of CGST Act.
Goods and services for food, beauty treatment, health mainly for personal consumption –Following supply of goods and services or both are not eligible for input tax credit [section 17(5)(b) of CGST Act]-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where 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 an element of taxable composite or mixed supply
(ii) membership of a club, health and fitness centre,
(iii) rent-a-cab, life insurance and health insurance except where (A) 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 (B) such inward supply of goods or services 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 taxable composite or mixed supply; and
(iv) travel benefits extended to employees on vacation such as leave or home travel concession.
These expenses are predominantly for personal use. However, ineligibility of input tax credit on rent-a-cab service, even if used for business purposes is highly unfair.
In respect of services covered under this clause, the input tax credit is eligible when used by registered person to provide similar service or as part of mixed supply or composite supply. This is a good and sensible provision.
Works contract service – Works contract services when supplied for construction of an immovable property (other than plant and machinery) is not eligible, except where it is an input service for further supply of works contract service – section 17(5)(c) of CGST Act.
‘Other than plant and machinery’ means input tax credit of GST paid on plant and machinery procured will be available.
Construction service – Goods or services received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in course or furtherance of business- section 17(5)(d) of CGST Act.
Explanation For the purpose of clauses (c) and (d), the expression”construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.
GST paid under composition scheme – Goods or services or both on which tax has been paid under section 10 (composition scheme) are not eligible- section 17(5)(e) of CGST Act.
Goods or services or both received by a non-resident taxable person – Goods or services or both received by a non-resident taxable person are not eligible for input tax credit,except on goods imported by him- section 17(5)(f) of CGST Act.
Goods and services used for personal consumption – Goods or services or both used for personal consumption are not eligible for input tax credit- section 17(5)(g) of CGST Act.
Lost, stolen or destroyed goods and free samples – Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples are not eligible for input tax credit – section 17(5)(h) of CGST Act.
GST paid after detection of fraud or suppression or goods removed in contravention of GST Act – Any tax paid in terms of sections 74, 129 and 130 of CGST Act are not eligible for input tax credit. This
covers GST paid after detection of fraud or suppression or goods removed in contravention of GST Act – section 17(5)(i) of CGST Act – same provision in rule 1(3) of Input Tax Credit Rules.