07 July 2024
Under the GST regime, certain input tax credits (ITC) are specifically disallowed or restricted. For office premises, this includes both capital expenditures and other expenses. The relevant section for disallowed ITC is Section 17(5) of the CGST Act, often referred to as the "blocked credits" section. Below is a list of disallowed GST inputs for office premises:
### Disallowed ITC for Office Premises under Section 17(5) of the CGST Act
1. **Motor Vehicles**: - ITC is not available for motor vehicles and other conveyances except when they are used for specified purposes such as further supply, transportation of passengers, imparting training on driving, etc. (Section 17(5)(a)).
2. **Food and Beverages, Outdoor Catering, Beauty Treatment, Health Services, Cosmetic and Plastic Surgery**: - ITC is not available for these services unless they are used to make an outward taxable supply of the same category of goods or services. (Section 17(5)(b)(i)).
3. **Membership of a Club, Health, and Fitness Centre**: - ITC is not available for membership fees for clubs, health, and fitness centers. (Section 17(5)(b)(ii)).
4. **Rent-a-Cab, Life Insurance, and Health Insurance**: - ITC is not available unless the services are mandated by law for employers to provide to their employees. (Section 17(5)(b)(iii)).
**Travel Benefits Extended to Employees**: - ITC is not available for travel benefits extended to employees on vacation such as leave or home travel concession. (Section 17(5)(b)(iv)).
**Works Contract Services**: - ITC is not available for works contract services when supplied for construction of an immovable property (other than plant and machinery), except where it is an input service for further supply of works contract service. (Section 17(5)(c)).
**Goods or Services Received for Construction**: - ITC is not available for goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account, including when such goods or services are used in the course or furtherance of business. (Section 17(5)(d)).
**Composition Scheme**: - ITC is not available on goods or services on which tax has been paid under the composition scheme. (Section 17(5)(e)).
**Goods and Services Used for Personal Consumption**: - ITC is not available for goods or services used primarily for personal consumption. (Section 17(5)(g)).
**Goods Lost, Stolen, Destroyed, Written Off, or Disposed of by Way of Gift or Free Samples**: - ITC is not available for these categories. (Section 17(5)(h)).
**Tax Paid in Certain Circumstances**: - ITC is not available for tax paid under sections 74 (tax not paid or short paid or erroneously refunded), 129 (detention, seizure, and release of goods and conveyances in transit), and 130 (confiscation of goods or conveyances and levy of penalty). (Section 17(5)(i)).
### Examples of Disallowed ITC for Office Premises:
- **Office Furniture and Fixtures**: If considered part of immovable property, ITC on construction of immovable property is disallowed. - **Renovation or Construction Costs**: ITC on works contract services or construction costs for creating office premises is disallowed. - **Employee Welfare Expenses**: ITC on club memberships, health and fitness services provided to employees is disallowed.
### Capital Expenditure:
- **Construction and Renovation**: ITC on the construction and renovation of office premises is disallowed as it falls under immovable property. - **Office Building Purchase**: ITC on the purchase of office buildings, if categorized as immovable property, is disallowed.
### Other Expenses:
- **Employee Benefits**: Expenses on life insurance and health insurance for employees (unless mandated by law) are not eligible for ITC. - **Personal Consumption**: Goods and services used for personal consumption do not qualify for ITC.
### Conclusion:
When planning expenditures for office premises, it is important to be aware of these restrictions to ensure proper GST compliance and accurate financial planning. Always consult with a tax professional for specific advice related to your business circumstances.
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