Cases where ITC cannot be Availed by the Dealer

 

There are certain cases in which ITC will not be available. These have been listed below.

1. ITC will not be available for motor vehicles and conveyances except when:

the vehicle is used for the supply of other vehicles or conveyances the rule shall not apply if the vehicle is used for transportation of passengers the vehicle is used for imparting training on driving, flying, navigating such vehicle or conveyances No ITC is available for motor vehicles or conveyances used for transportation of goods.

2. No ITC will be available for the supply of following goods or services, or both:

food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where the category of inward and outward supply is same or the  component belongs to a mixed or composite supply under GST

sale of membership in a club, health, fitness center ITC will not be available for rent-a-cab, health insurance and life insurance except the following any services which are made obligatory for an employer to provide its employee by the Indian Government under any current law in force where the category is same for the inward supply and outward supply or it is a part of the mixed or composite supply in the case of travel, benefits extended to employees on vacation  such as leave or home travel concession.

3. ITC will not be available for any work contract services. ITC for the construction of an immovable property cannot be availed, except where the input service is used for further work contract services.

4. No ITC will be provided for materials used in the construction of immovable property or for furtherance of business. ITC will not be available for the goods or services or both provided to a taxable person used in the construction of an immovable property on his own account including when such goods or services or both are used in the course or furtherance of business.

For example: Raj is the chairman of XYZ construction private limited. He ordered certain input goods or services like cement, or labour to be used for the construction of his house. Cement purchased was also used partly for the official company projects. ITC would not be available for the above input  goods or services.

5. No ITC will be available to the person who has made the payment of tax under Composition Scheme in GST law.

6. ITC cannot be availed on goods or services or both received by a non-resident taxable person except for any of the goods imported by him.

7. No ITC will be available for the goods and services or both used for personal consumption and not for business purposes.

8. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples are not available for ITC under GST.

9. ITC will not be available in the case of any tax paid due to non or short tax payment, excessive refund or ITC utilized or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.

It is therefore imperative for companies to make the necessary operational and financial changes for accommodating the above cases of ineligibility of ITC.