Explore the specific cases where Input Tax Credit (ITC) under GST is not available for FY 2025-26. Understand the rules, exceptions, and calculations involved.
Motor vehicles and conveyances
Services of general insurance, servicing, repair and maintenance
Food, beverages, club memberships and others
Sale of membership in a club, health, fitness centre
Rent-a-cab, life insurance, health insurance
Travel
Works contract
Constructing an immovable property on own account
Composition Scheme
No ITC for Non-residents
No ITC for personal use
Free samples and destroyed goods
No ITC in fraud cases
No ITC on restaurants
FAQs on Ineligible ITC
ITC on Motor Vehicles
ITC is not available for motor vehicles used to transport persons with a seating capacity of up to 13 persons.
ITC is available if the vehicle is used for supplying other vehicles.
ITC is allowed for passenger transportation services.
Driving schools can claim ITC on vehicles used for training.
Exceptions for Vessels and Aircrafts
ITC is generally not available for vessels and aircrafts unless used for specific purposes.
ITC is available for vessels used in goods transportation.
Aircrafts used for passenger transport services can claim ITC.
Training schools for flying can claim ITC on aircrafts.
Example Calculation
A car dealer purchases a car for ₹50 lakh plus ₹14 lakh GST and sells it for ₹70 lakh plus ₹19.6 lakh GST.
Dealer claims ITC of ₹14 lakh.
GST payable on sale: ₹19.6 lakh.
Net GST payable after ITC: ₹5.6 lakh.
General Insurance Services
No ITC is allowed on general insurance services related to motor vehicles.
ITC is available if the insurance is for vehicles used in taxable supplies.
Manufacturers of vehicles can claim ITC on insurance.
Insurance companies can claim ITC on policies issued.
Servicing and Repair
ITC is not available for servicing and repair of motor vehicles.
ITC is available if the service is part of a taxable supply.
Repair services for vehicles used in business operations can claim ITC.
ITC is allowed if the repair is for vehicles used in training.
Food and Beverages
ITC is not available for food and beverages supplied to employees.
ITC is available if the supply is part of a taxable outward supply.
Catering services for business events cannot claim ITC.
ITC is allowed if food is part of a composite supply.
Club Memberships
ITC is not available for club memberships provided to employees.
ITC is available if the membership is part of a taxable supply.
Memberships provided as part of employee benefits cannot claim ITC.
ITC is allowed if the membership is for business promotion.
Health and Fitness Centre Memberships
ITC is not available for memberships in health and fitness centres.
ITC is available if the membership is part of a taxable supply.
Corporate memberships for employee wellness cannot claim ITC.
ITC is allowed if the membership is for business clients.
Rent-a-Cab Services
ITC is not available for rent-a-cab services except under specific conditions.
ITC is available if the service is provided to a registered person.
Corporate cab services for employees cannot claim ITC.
ITC is allowed if the service is part of a taxable supply.
Life and Health Insurance
ITC is not available for life and health insurance services provided to employees.
ITC is available if the insurance is mandated by law.
Group insurance policies for employees cannot claim ITC.
ITC is allowed if the insurance is for business clients.
Business Travel
ITC is not available for travel benefits extended to employees.
ITC is available if travel is for business purposes.
Employee travel for personal reasons cannot claim ITC.
ITC is allowed if travel is part of a taxable supply.
Works Contract Services
ITC is not available for works contract services for construction of immovable property.
ITC is available if the contract is for plant and machinery.
Construction services for own use cannot claim ITC.
ITC is allowed if the contract is part of a taxable supply.
Construction of Immovable Property
ITC is not available for construction of immovable property on own account.
ITC is available if the property is for plant and machinery.
Construction for personal use cannot claim ITC.
ITC is allowed if the construction is for leasing or renting.
Composition Scheme Dealers
Dealers under the Composition Scheme cannot claim ITC.
Composition dealers pay tax at a fixed rate.
ITC is not available on purchases made by composition dealers.
Dealers must file GST CMP-08 quarterly.
Non-resident Taxable Persons
Non-resident taxable persons cannot claim ITC except on imports.
ITC is available on goods imported for business.
Non-residents must register under GST to claim ITC.
ITC is not available on services consumed in India.
Personal Use Goods and Services
ITC is not available for goods and services used for personal purposes.
ITC is available if goods are used for business purposes.
Personal purchases cannot claim ITC.
ITC is allowed if goods are part of a taxable supply.
Free Samples
ITC is not available for goods distributed as free samples.
ITC is available if samples are part of a taxable supply.
Promotional goods given for free cannot claim ITC.
ITC is allowed if samples are for business clients.
Destroyed Goods
ITC is not available for goods destroyed or lost.
ITC is available if goods are part of a taxable supply.
Damaged goods written off cannot claim ITC.
ITC is allowed if goods are used for business purposes.
Fraudulent Activities
ITC is not available if involved in fraudulent activities.
ITC is denied if invoices are fake or inflated.
Penalties apply for fraudulent ITC claims.
ITC is allowed if transactions are genuine and documented.
Restaurant Services
ITC is not available for goods and services used in restaurants.
Restaurants under composition scheme cannot claim ITC.
ITC is available if restaurant is part of a hotel with turnover above ₹1.5 crore.
ITC is allowed if restaurant services are part of a composite supply.
Can ITC be claimed on motor vehicles used for business?
ITC can be claimed on motor vehicles used for business if they are used for taxable supplies like transportation of goods or passengers, or if the vehicle is used for training purposes.
Is ITC available on life insurance premiums?
ITC is generally not available on life insurance premiums unless the insurance is mandated by law or is part of a taxable outward supply.
What are the conditions for claiming ITC on construction services?
ITC on construction services can be claimed if the construction is for plant and machinery or if the property is used for leasing or renting services.
Are free samples eligible for ITC?
No, ITC cannot be claimed on goods distributed as free samples as they are not considered part of a taxable supply.
How does the Composition Scheme affect ITC claims?
Under the Composition Scheme, dealers pay tax at a fixed rate and cannot claim ITC on their purchases, simplifying compliance but limiting tax benefits.
Can non-resident taxable persons claim ITC?
Non-resident taxable persons can claim ITC only on goods imported for business purposes, provided they are registered under GST.
Is ITC available for personal purchases?
No, ITC is not available for goods and services used for personal purposes. It is only available for business-related expenses.
What happens to ITC in cases of fraud?
In cases of fraud, ITC claims are denied, and penalties may be imposed. ITC is only allowed for genuine transactions with proper documentation.
Are restaurant services eligible for ITC?
ITC is not available for restaurant services unless the restaurant is part of a larger establishment like a hotel with a turnover above ₹1.5 crore.
How does ITC work for destroyed goods?
ITC cannot be claimed on goods that are destroyed or lost, as they are not part of a taxable supply. ITC is only available for goods used in business.