GST
Ineligible credit even from a genuine supplier
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Facts
Some credits are blocked by law even if the supplier is genuine and the invoice is in 2B. Sec 17(5) blocks credit on items like motor cars for personal use, food and beverages, club membership and construction of immovable property.
Provisions and law
- Sec 17(5), CGST Act 2017Lists blocked credits on which no ITC is available even with a valid invoice
- Sec 16(2), CGST Act 2017Lists the conditions to be met before ITC can be taken
Analysis
Due diligence is about the supplier; eligibility is about what you bought. Example: a company buys a Rs 10 lakh passenger car for directors, GST Rs 2.8 lakh plus cess. Even with a perfect invoice, credit is blocked under Sec 17(5) unless the car is used for specified purposes such as further supply or passenger transport. Tag such purchases separately.
Conclusion
- Review purchases against the Sec 17(5) list
- Tag blocked items in your accounting software
- Do not claim, or reverse, blocked credit in GSTR-3B
- Show it as ineligible in GSTR-9 Table 8
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