Posted by : CS K. K. Agrawal Jul 12, 2018







SECTION 17(5). BLOCKED CREDIT

Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:—

(a) motor vehicles for transportation of persons having approved seating capacity of not more than (i.e. upto) 13 persons (including the driver), vessels and aircraft and other conveyances

(therefore ITC on bus and mini bus available whose sitting capacity exceeds 13)


except when they are used––

(i) for making the following taxable supplies, namely:—

(A) further supply of such vehicles or vessels or aircraft conveyances; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles, vessels or aircraft or conveyances;

It is proposed to expand the scope of ITC availability in case of motor vehicles having approved capacity of upto 13 persons (including the driver) in case it is used for specified purposes.

(ii) for transportation of goods; and

The amendment is sought to make it clear that input tax credit would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles.

After the amendment is carried out, input tax credit would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including the driver), vessels and aircraft when these are used for personal purposes

(iii) for transportation of money for or by a banking company or a financial institution.

An amendment is also being made to the effect that ITC will not be denied in respect of motor vehicles if they are used for transportation of money for or by a banking company or a financial institution.

(aa) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels and aircraft for which the credit is not available in accordance with the provisions of clause (a);

The proposal is to clarify that ITC in respect of services of general insurance, servicing, repair and maintenance in respect of those motor vehicles, vessels and aircraft on which ITC is not available under clause (a).


(b) the following supply of goods or services or both—

(i) food and beverages,

outdoor catering,

beauty treatment,

health services, cosmetic and plastic surgery,

renting or hiring of motor vehicles, vessels and aircraft referred to in clause (a),

life insurance and health insurance except

where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

(ii) membership of a club, health and fitness centre; and

(iii) rent-a-cab, life insurance and health insurance except where-

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where the provision of such goods or services or both is obligatory for an employer to provide to its employees under any law for the time being in force



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