Though input tax credit can be claimed by a person registered under GST for most inputs, some services are not eligible for input tax credit claim. After almost four months post GST businesses are still trying to understand the changes required in their current systems to accommodate with new compliance model.
We all are doing the analysis to understand its overall impact. On this note, we bring to you our impact analysis on those expenses which are not allowed for GST Input credit and what outcome one should draw from it.
In this article, we look at such services, which are not eligible for input tax credit under GST.
Here is the list of items excluded from input tax credit claim under GST:
Motor Vehicle and Conveyances
Input tax credit can be claimed for motor vehicles or conveyance only when they are used for
- Making a further supply of such vehicles, Conveyances (For exampleMaruti ,Honda car manufacturers).
- Transportation of passengers (For example Companies giving vehicles on lease to Ola, Uber, Travel agencies owning the vehicles).
- Imparting training (Motor driving schools).
- Transportation of goods (GTA like GATI, INTERIM, BLUE DART).
Therefore companies other than above, cannot claim GST credit of expenses incurred in the purchase of Motor Vehicle. Also, this brings us to consult with our tax advisors on treatment of input credit under following categories
- Maintenance expenses for office vehicles
- Conveyance expenses for employees
- Logistic expenses incurred in transportation of goods.
Food, Beverages and Outdoor Catering
GST Input credit can be claimed for food, beverages only by such registered person who is engaged in the business of
- Restaurant services
- Food and catering services
Therefore regular taxpayers i.e. companies other than above, cannot claim GST credit of expenses relating to food, beverages, and catering incurred during Staff welfare, festivals, Canteen service, Business meetings.
This tells us to consult with our tax advisors on the treatment of input credit for food platforms like Food panda, Zomato, and other online food chains.
However from 1st Nov the GST levy on AC & Non AC Restaurants coming down to 5%, the restaurants will not be able to take the benefits of ITC.
Membership of a club, health and fitness center
In most of the Multinational companies, large size Indian companies generally following expenses are offered to employees:
- Beauty treatment
- Health services
These expenses are also out of the purview of claiming GST Input credit even if it is given as gifts up to 50,000 for the regular taxpayer.
Life and Health Insurance
The policy holders who have taken general insurance (includes fire, marine, car, theft, etc.) can enjoy GST Input credit paid on the policy premium.However, the premium paid for health and life insurance will not be allowed for GST input credit.
Travel Benefit for Employees
The travel benefits extended to employees on vocation such as leave or home travel concession cannot be claimed for GST input credit.
We believe it is imperative for the companies to make the necessary operational and financial changes for accommodating the above cases of ineligibility of ITC. In our next edition of the blog, we will discuss some more such expenses in detail.
This leaves us all with a question, what do I need to discuss with my accountants and tax consultants on the requirement to re-structure my business process?