KTPA

Cases where Input Tax Credit [ITC] is not available

Input tax credit shall not be available in respect of the following supply of goods or services.

Purchase of Motor Vehicles

Input tax credit shall not be available for the GST paid in respect of passenger motor vehicles, which has the approved seating capacity of up to 13 persons including driver. However, the input tax credit shall be allowed if motor vehicle is used for following services:

1.

 

Further supply of such motor vehicles

2.

 

Transportation of passengers

3.

 

Imparting training to drive such motor vehicles

Purchase of Vessels and Aircrafts

GST paid in respect of vessels and aircrafts are not eligible for Input tax credit. However, the input tax credit shall be allowed if vessel or aircraft is used for following services:

1.

 

Further supply of such vessels or aircraft

2.

 

Transportation of passengers

3.

 

Imparting of training to navigate such vessels

4.

 

Imparting of training to fly such aircrafts

5.

 

For transportation of goods

Repair & maintenance of Motor Vehicles, Vessels or Aircrafts

Input tax credit shall not be available for the taxes paid in respect of general insurance, servicing, repair and maintenance of such motor vehicles, vessels or aircraft. However, the credit for the tax paid on these services shall be allowed in following cases:

1.

 

If motor vehicles, vessels or aircraft are used for the purposes specified above and ITC is allowed thereon

2.

 

If these services are received by a taxable person engaged in:

a)

 

Manufacturing of such motor vehicles, vessels or aircraft

b)

 

Rendering general insurance services in respect of such motor vehicles, vessels or aircraft insured by them.

Personal care Services

Following supply of goods and services are not eligible for input tax credit:

1.

 

Food and beverages, outdoor catering, beauty treatment, health services, cosmetic, plastic surgery

2.

 

Leasing, renting or hiring of motor vehicles, vessels or aircrafts (i.e., cab or taxi services, etc.)

3.

 

Life insurance and health insurance

4.

 

Membership of a club, health and fitness centre

5.

 

Travel benefits extended to employees on vacation such as leave or home travel concession.

The credit of taxes paid on goods or services mentioned in point no. 1 to 3 above would be allowed if such inputs or input services are used by registered person for making an outward taxable supply of the same category of goods or services or as an element of taxable composite supply or mixed supply.

Example, if an airline company is providing catering services to its passengers, then it can avail of credit of taxes paid in respect of food and beverages as such supply is part of the composite supply of transportation services.

The ITC in respect of goods or services mentioned in point no. 5 would be allowed if it is obligatory for an employer to provide the same to its employees under any law.

The ITC in respect of goods or services mentioned in point no. 4 shall not available in any circumstance.

Works Contract service

GST paid in respect of works contract services, when supplied for construction of an immovable property (other than plant and machinery), is not eligible for input tax credit. However, the credit of GST paid on works contract shall be available if input services are used for further supply of works contract service.

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 or in the course or furtherance of business shall not be eligible for input tax credit. The expression 'construction' shall include 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 on which tax has been paid under composition scheme are not eligible for input tax credit.

Supply received by non-resident taxable person

Goods or services received by a non-resident taxable person are not eligible for input tax credit. However, the non-resident taxable person can avail of the credit of taxes paid on goods imported by him.

Supply for personal consumption

Goods or services used by a taxable personal for his personal consumption are not eligible for input tax credit, i.e., catering or beauty treatment services.

Loss of goods or free samples

GST paid in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples are not eligible for input tax credit.

Fraudulent claim or contravention of Law

No credit shall be available for any tax paid after detection of fraud or suppression of facts or goods removed in contravention of GST law.

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