Learn the concept of Blocked Credit under GST

Blocked credit under GST means the supply of goods and services on which the availment of credit has been restricted by the relevant provisions of law.

Let us understand the said provision through the practical Case Scenario

Case Scenario

Hero Cabs Pvt. Ltd. paid GST on following inward supplies during the last tax period. Determine the eligible ITC by ruling out the Blocked credits in accordance with the provisions of Section 17(5)(a).

S. No.	Particulars	Amount of Tax paid (in Rs.)
1.	Owner purchased one motor car, having seating capacity of 5 passengers including driver to be used by him for going to factory	2,80,000
2.	Purchased 5 motor cars for running as taxi	2,50,000
3.	Purchased cars for renting out for transportation of passengers	10,00,000
4.	Purchased motor vehicles to impart driving skills (in a training centre owned by Hero Cabs)	2,00,000
5.	Trucks purchased for transportation of its finished goods	9,70,000
6.	Car purchased for official use of the employees	1,20,000
7.	Buses purchased for transportation of employees from their residence to office and back	5,80,000

Solution:

The provisions of Section 17(5) clearly state that, “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 thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:—

(A) Further supply of such motor vehicles; or

(B) Transportation of passengers; or

(C) Imparting training on driving such motor vehicles;”

In the light of above mentioned provisions, the eligible ITC in the case of Hero Cabs can be determined as follows:

S. No.	Particulars	Amount of Tax paid (in Rs.)	Eligible ITC (in Rs.)
1.	Owner purchased one motor car, having seating capacity of 5 passengers including driver to be used by him for going to factory	2,80,000	——–
2.	Purchased 5 motor cars for running as taxi	2,50,000	2,50,000
3.	Purchased cars for renting out for transportation of passengers	10,00,000	10,00,000
4.	Purchased motor vehicles to impart driving skills (in a training center owned by Hero Cabs)	2,00,000	2,00,000
5.	Trucks purchased for transportation of its finished goods	9,70,000	9,70,000
6.	Car purchased for official use of the employees	1,20,000	———
7.	Buses purchased for transportation of employees from their residence to office and back	5,80,000	5,80,000
	Total	34,00,000	30,00,000

Thus, Hero Cabs Pvt. Ltd. Is eligible to claim ITC of Rs.30,00,000/- out of total taxes paid amounting Rs. 34,00,000.

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