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One of the benefits of GST registration in India is that the taxpayer is eligible to claim ITC for taxes paid on inward supplies. This was done to fulfil one of the primary objectives of the introduction of GST, to eliminate the cascading effect of taxes which can be eliminated through the free flow of input credit between central and state authorities. However, in some cases, the taxpayer is not eligible to Claim Input Tax Credit. Such situations will be discussed in this article.
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There are certain general disqualifications based on which the taxpayer is not eligible to Claim Input Tax Credit. These general disqualifications are:
Other than the above stated general disqualifications, Section 17(5) of CGST Act, 2017 also specifies a list of conditions where the taxpayer is not eligible to claim Input Tax Credit. Few of such situations are specified below.
1. No ITC for taxes paid on motor vehicles and conveyances. However, there are certain exemptions where a registered person can claim ITC, these exemptions are:
2. For any goods or services like:
3. Any services of the nature of works contract supplied for construction of an immovable property, other than plant & machinery. However, when these services are used as an input service for the further supply of works contract they can be claimed as ITC.
4. Any goods or services received by any taxpayer for the construction of immovable property on his own account, other than plant & machinery, even when used in the course or furtherance of business.
5. If the goods or services are supplied by a composite dealer registered under Section 10 of CGST Act, 2017. There is a simple logic behind the same that no dual benefits are provided to a single taxpayer. Any taxpayer registered under Composition Scheme enjoys the benefit to remit tax at a minimal rate. And they are not authorized to issue tax invoices, without which no ITC can be claimed.
6. If any goods or services are used for personal consumption, then no ITC can be availed. ITC can only be availed of goods or services which contribute to output either directly or indirectly.
7. No ITC for taxes paid on Goods lost, stolen, destroyed, written off, gifted, or free samples.
8. For any tax paid due to small payment on account of fraud, suppression, Mis-declaration, seizure, detention.
The following conditions are to be fulfilled in order to claim Input Tax Credit:
It may be noted that the time limit to claim Input Tax Credit against an invoice or debit notes is the due date of filing GST Return for September of next financial year or the date of filing of the relevant annual return. For more information on GST and related laws you are advised to contact Enterslice.
Read our article:GST and Input Tax Credit on Promotional Products
Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
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