Types Of GST Credit

 

Types Of GST Credit:

Eligible

Non-eligible

Blocked

Introduction:

Under the Goods and Services Tax (GST) in India, input tax credit (ITC) is an essential feature that allows businesses to claim credit for the taxes they have paid on inputs used in the course of their business. However, not all inputs are eligible for ITC. Here are the Different Types of GST credit in which eligible,non-eligible, and blocked ITCs under GST are considered. Every businessman must know what are the eligible credit for them otherwise claiming and utilization of ineligible credits may attract penal provisions under GST. The eligible or ineligible credit may vary from business to business:

List Of Eligible Input Tax Credits (ITC) Under GST:

  1. Input tax credits on goods and services used for business purposes and acquired from registered suppliers
  2. ITC on inputs (raw materials), including inputs used in the manufacture of goods such as components, ingredients, and packaging materials
  3. ITC on capital goods, including machinery, equipment, and tools, used for business purposes
  4. ITC on input services, such as transportation, logistics, advertising, legal, accounting, and consulting services
  5. ITC on inward supplies received from a supplier located in a Special Economic Zone (SEZ).
  6. ITC on tax paid on reverse charge mechanism (RCM) supplies, where the recipient of goods or services is liable to pay tax
  7. ITC on goods and services used for making taxable supplies, including both goods and services supplied within the same state or across different states

Non-Eligible Goods And Services For ITC:

  • All those purchases or expenses which do not pertain to business are not eligible for taking the input tax credit. For example, if you are in the business of selling paints for walls then input tax credit of fabrics purchased cannot be claimed since there is no nexus between purchases made with existing business.
  • Goods and services used for personal purposes or non-business activities
  • Goods and services used for exempt supplies or supplies that are not subject to tax

Blocked ITC

  1. Motor vehicles: ITC cannot be claimed on the purchase of motor vehicles unless they are used for specific purposes. Such as providing taxable transportation services, renting them out as taxis, or for training purposes.
  2. Food, beverages, and outdoor catering: ITC is not available for goods or services related to food, beverages, and outdoor catering, except when used for further supply. Such items or for providing specified services like restaurants, canteens, and catering services.
  3. Membership in clubs, health clubs, and fitness centers: ITC cannot be claimed on expenses related to membership in clubs, health clubs, and fitness centers. Unless they are specifically required for business purposes like employee welfare.
for detailed information go to: 

Significant Types Of GST Credit



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