1. Motor vehicles, vessels, and aircraft

No ITC available for Motor vehicles used to transport of persons, having a seating capacity of less than or equal to 12 persons excluding the driver (total 13 including Driver).
Example, if you buy a car for your business then you cannot claim ITC on it.

Exceptions to ITC on motor vehicles/vessels/aircrafts

ITC will be available when the vehicle is used for further taxable supplies by the following.

a) you are in Buy/Sell business of vehicles or conveyances, vessels or aircraft.

If you are in the business of supplying cars then you can claim ITC.

Example: you are a car dealer and purchases a car for Rs.10 lakh plus ₹ 2.8 lakh GST (ignoring cess calculations). The same car was later sold for ₹12 lakhs plus ₹3.36 lakh GST. Then you as a dealer can claim ITC of ₹ 2.8 lakhs and pay balance ₹56,000 (3.36-2.8).

b) Transportation of passengers

If you are providing transportation of passengers then you can claim ITC on the vehicle purchased.

Example: Nadu travels purchases a bus for transport of passengers. then ITC is available.

c) Imparting training on driving, flying, navigating such vehicle or conveyances or vessels or aircraft, respectively.

A driving school purchases a car to give training to students. The school can claim ITC on the GST paid on the car.

d) Transportation of goods

ITC will be allowed on motor vehicles and other conveyances used to transport goods from one place to another.

Goods Transport Agencies (GTA) are not covered here

GST blog cover Kansala Naresh & Associates

2. Food, beverages (Drinks), club memberships and others for personal use

No ITC is allowed on following goods or services or both:
  • Food and beverages
  • Outdoor catering
  • Beauty treatment
  • Health services
  • Cosmetic and plastic surgery
However, ITC will be available if the person is dealing/doing a business of above-mentioned supplies or the component belongs to a mixed or composite supply under GST.
Examples- Nadu Enterprises arranges an office party for its employees then they are not allowed to claim ITC on the food & beverages served.

3. Services of general insurance, servicing, repair, and maintenance

No ITC is allowed on services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in (1).
Exceptions to ITC on insurance, repair or maintenance
Same as expectations mentioned for motor vehicles/vessels/aircrafts
where received by a taxable person engaged—
  1. In the manufacture of such motor vehicles, vessels or aircraft; or
  2. In the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him

4. Sale of membership in a club, health, fitness centre

No ITC will be allowed on any membership fees for gyms, clubs etc.

Example: X, a Managing Director has taken membership of a club and the company pays the membership fees.  ITC will not be available to the company or Mr. X.

5. Rent-a-cab, life insurance, health insurance

ITC is not available for rent-a-cab, health insurance, and life insurance.
However, the following are exceptions, i.e., ITC is available for-

1.Any services which are made obligatory for an employer to provide its employee by the Indian Government under any current law in force

Example: Lets assuming the government passes a rule for all employers to provide mandatory life insurance service to all staff. Nadu Ltd. buys insurance for all staff. The ITC will be available to Nadu Ltd. on the GST paid on insurance service.

2.If the person is in the same line of business i.e. the category inward supply and outward supply is the same or it is a part of the mixed or composite supply

Example: ABC Travels lends out a car to XYZ Travels. Then XYZ Travels can claim ITC on the same.

3.Leasing, renting or hiring of motor vehicles, vessels or aircraft with exceptions same as those mentioned for (1).

6.Travel Expenses.

ITC is not available in the case of travel, benefits extended to employees on vacation such as leave or home travel concession.

Example: Nadu Ltd. offers a travel package to its employees for personal holidays. ITC on GST paid by Nadu Ltd. for the holiday package will not be allowed.

ITC will be allowed for travel for business purposes only.

7.Works contract

ITC shall 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.

For example, Nadu Contractors are constructing an immovable property. They cannot claim any ITC on the works contract. However, Nadu hires Panu Contractors for a portion of the works contract. Nadu can claim ITC on the GST charged by Panu Contractors.

8. Constructing an immovable property on own account

No ITC is available for goods/services for construction of immovable property on his own account. Even if such goods/services are used in the course or furtherance of business, ITC will not be available.

But this rule does not apply to plant or machinery. ITC is available on inputs used to manufacture plant and machinery for own use.

Example: Nadu cement Industries constructs an office building for its headquarters. ITC will not be available. Nadu cement Industries also constructs stone crusher to manufacture cement. ITC is available since it is a plant.

9. Composition Scheme

No ITC would be available to the person who has made the payment of tax under composition scheme in GST law.

10. No ITC for Non-residents

ITC cannot be availed on goods/services received by a non-resident taxable person. ITC is only available on any goods imported by him.

11. No ITC for personal use

No ITC will be available for the goods/ services used for personal purposed and not for business purposes.

12. Free samples and destroyed goods

No ITC is available for goods lost, stolen, destroyed, written off or given off as gift or free samples.

13. No ITC in fraud cases

ITC will not be available for any tax paid due to fraud cases which have resulted in –

  • Non or short tax payment or
  • Excessive refund or
  • ITC utilized or

Fraud cases include fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.

14. No ITC on restaurants

As per Notification No. 46/2017-Central Tax (Rate), dated 14th November 2017, standalone restaurants will charge only 5% GST but cannot claim any ITC on the inputs. But, restaurants which are part of hotels with room tariffs exceeding ₹ 7,500 can pay 18% GST and Claim ITC on inputs. Example: McDonald’s charges 5% GST so cannot claim any ITC on inputs.

Disclaimer: Due care has been taken to draft this write-up and is intended to express the Authors understanding and to start an academic discussion on the subject discussed in above write-up. it should not be considered as professional advice. Readers are advised to refer to relevant provisions of law before applying any of the above-mentioned views. The author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the content of this write-up.

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