Q 1. Will compliance of the provisions of Section 17(2) regarding restriction of credits relatable to exempt supplies be mandatory to a Banking Company/ Financial Institution engaged in accepting deposits or extending loans or? Ans. No. A Banking Company/ Financial Institution engaged in supplying services by way of accepting deposits, extending loans or advances has the following options:
Comply with the provisions of Section 17(2) regarding restriction of credits relatable to exempt supplies in the manner prescribed; or Avail 50% of the eligible input tax credit every month on inputs, capital goods and input services and the remaining 50% shall not be available.
The option exercised cannot be withdrawn in the same year. The restriction of 50% will not apply to the tax paid on supplies made by one registered person to another registered person having the same PAN.
Q 2. Whether input tax credit is allowed on inputs which become waste and is sold as scrap?
Ans. Section 17(5) (h) specifically restricts input tax credit on goods lost, stolen, destroyed, written off or disposed by way of gift or free samples. Therefore, If the goods have been destroyed in full, input tax credit will not be available. However, if in the process of manufacture some inputs become waste and are sold as scrap, credit shall not be denied. Further, output tax shall be payable on sale of such waste/scrap. Q 3. Whether input tax paid on Motor vehicle and other conveyances which is used for courier agency, outdoor catering, pandal and shamiana and tour operator is eligible? Ans. The restriction of input tax credit on motor vehicles and conveyances provided under Section 17 (5) (a) is on such motor vehicles/ conveyances except when they are used for further supply of vehicles/ conveyances, transportation of passengers, imparting training or for transportation of goods only. Therefore, input tax credit will be available when it is used by courier agency, outdoor catering, pandal and shamiana and tour operator as it covers use of vehicles for transportation of goods/ transportation of passengers.
Q 4. What are the conditions to avail the input tax credit on Rent a cab, life Insurance, Health Insurance?
Ans. Tax paid w.r.t rent a cab services, life/ health insurance services will be eligible as input tax credit subject to the following conditions:
If the Government notifies that such services are obligatory for an employer to provide to its employees under any law for the time being in force, or Such services are used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply.
Q 5. Whether taxes paid on change of interiors of service apartment is eligible for input tax credit?
Ans. Input tax credit is not available on goods or services received by a taxable person for construction of an immovable property on his own account other than plant and machinery even when used in course or furtherance of business. The word “construction” includes reconstruction, renovation, additions or alterations or repairs to the extent of capitalization to the said immovable property. If the cost of interiors is capitalized towards the cost of immovable property then it forms part of the cost of immovable property (Service apartment) and accordingly taxes paid on change of interiors of service apartment will not be eligible as input tax credit. Q 6. Whether benefit of input tax credit would be available if the company procures health insurance services for benefit of its employees. Procurement of such services is mandatory under Factories Act. Ans. Yes. Section 17(5) (b)(iii)(A) provides that tax paid w.r.t rent a cab services, life/ health insurance services will be eligible as input tax credit where the Government notifies that such services are obligatory for an employer to provide to its employees under any law for the time being in force. Recommended Articles –
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