Certainly! Here’s a detailed guide on cases where Input Tax Credit (ITC) under the Goods and Services Tax (GST) in India cannot be availed, focusing on various categories like motor vehicles, food and beverages, insurance services, membership fees, and more, along with examples for better understanding:
1. Motor Vehicles and Conveyances
Input Tax Credit cannot be claimed on motor vehicles and conveyances unless they are used for certain specified purposes like making further taxable supplies of such vehicles or transportation of passengers.
Example: A company purchases a luxury car for its CEO’s personal use. Since it’s not used for business purposes or for further taxable supplies, ITC cannot be availed.
2. Food, Beverages, Club Memberships, and Others
ITC is restricted on goods or services used for personal consumption, such as food and beverages, club memberships, and similar personal expenses.
Example: A business purchases food items for its employees’ daily meals. Since it’s not for business purposes or resale, ITC is not available.
3. Services of General Insurance, Servicing, Repair, and Maintenance
ITC cannot be claimed for services like general insurance (except in specific cases like motor vehicles), servicing, repair, and maintenance of goods that are used for personal purposes.
Example: A company gets insurance for its director’s health. Since it’s for personal use, ITC cannot be availed.
4. Sale of Membership in a Club, Health, Fitness Centre
No ITC is allowed on membership fees paid for clubs, health centers, fitness centers, etc., unless they are used for business purposes.
Example: A business purchases a gym membership for its employees’ personal fitness. Since it’s not directly related to business activities, ITC is not applicable.
5. Rent-a-Cab, Life Insurance, Health Insurance
ITC is not available for services like renting cabs, life insurance, or health insurance, unless it’s mandated by law or used for business purposes.
Example: A company pays for life insurance premiums for its employees’ personal coverage. Since it’s not for business use, ITC cannot be claimed.
6. Travel
ITC cannot be availed on expenses related to travel, unless it’s for business purposes or required by law.
Example: A company pays for a holiday trip for its employees. Since it’s not a business-related expense, ITC is not allowed.
7. Works Contract, Constructing an Immovable Property on Own Account
ITC restrictions apply to works contracts and construction of immovable properties for personal use.
Example: A developer constructs a residential building for personal use. Since it’s not for commercial purposes, ITC cannot be claimed.
8. Composition Scheme
Businesses opting for the Composition Scheme under GST cannot claim ITC.
Example: A small restaurant opts for the Composition Scheme. Since ITC is not available under this scheme, they cannot claim it.
9. No ITC for Non-Residents
Non-resident taxable persons are not eligible for ITC.
Example: A foreign company temporarily operating in India is not entitled to claim ITC.
10. No ITC for Personal Use
Any goods or services purchased for personal consumption or non-business purposes are not eligible for ITC.
Example: An individual purchases a laptop for personal use. Since it’s not for business purposes, ITC cannot be claimed.
11. Free Samples and Destroyed Goods
ITC cannot be claimed on goods given away as free samples or those that are destroyed, lost, or stolen.
Example: A company distributes free samples of its new product. Since they are not sold or used for business purposes, ITC is not applicable.
12. No ITC in Fraud Cases
In cases of fraud or non-compliance, where input tax credit is wrongly claimed, it is not allowed.
Example: A company falsely claims ITC on non-business expenses. This action constitutes fraud, and ITC cannot be claimed.
13. No ITC on Restaurants
Restaurants and catering services cannot claim ITC on certain items like outdoor catering, food and beverages, etc.
Example: A restaurant purchases raw materials for outdoor catering services. Since ITC is restricted on outdoor catering, it cannot be claimed.
Understanding these scenarios and examples can help businesses navigate the complexities of GST and ensure compliance with the regulations regarding Input Tax Credit eligibility.
