Page 7 - Chap7 ITC

Answer : Computation of ITC available with XYZ Ltd. for the month of October, 20XY:-
S.No. Particulars ITC (₹) Remark
1. Purchase of Machinery where 1,15,000 As per section 16(2)(a) of CGST Act, ITC is allowed on goods
debit note is issued purchased on basis of debit note which is a valid document.
2. Input purchased was directly 80,000 As per explanation to section 16(2)(b), goods delivered to a third
delivered to Mr. Joe, a job person on direction of registered person are deemed to have been
worker & a registered supplier received by such registered person. So, ITC is available to
registered person even though he did not receive the goods.
3. Computers purchased - As per section 16(3) of CGST Act, if depreciation has been
(Depreciation is claimed on claimed on the tax component of cost of capital goods & plant
GST portion under Income- & machinery under Income-tax Act, 1961, then ITC is not
Tax Act, 1961) allowed on the said tax component.

4. Purchase of iron which is Nil 1st proviso to section 16(2) of CGST Act states that if goods
used as a raw material against an invoice are received in instalments, ITC can be availed
only on the receipt of last instalment. Since last instalment is
received in November, ITC cannot be availed in October.

5. Purchase of accessories 90,000 As per explanation to section 16(2)(b), goods delivered to a third
delivered directly to dealers of person on direction of registered person are deemed to have been
company received by such registered person. So, ITC is available to
registered person even though he did not receive the goods.

6. Machinery purchased to be used 3,00,000 As per section 16(1) of CGST Act, ITC is available on goods
in the manufacturing process used or intended to be used in the course or furtherance of business.
7. Input services 1,75,000 As per section 16(4), ITC on an invoice cannot be availed after
the 30th day of November following the end of financial year
to which such invoice pertains or the date of filing annual
return, whichever is earlier. Since, the annual return for the
FY 20XX-XY has been filed on 15thSep 20XY, ITC on the
invoice pertaining to FY 20XX-XY cannot be availed after 15th
September, 20XY

04: Sec 17(5): Blocked Credit

Sec 17(5)(b): Food Beverage, catering, beauty treatment, health services, Cosmetic & plastic surgery etc.
Membership of club/ Travel benefits to employees

Flamingo Ltd. is an airlines providing passenger transportation services by air. The company offers
Q.6
meals of premium quality to passengers on board the aircraft. The value of such meals is compulsorily
included in the price of the air ticket. The company avails outdoor catering services of Dhaniaram Pvt. Ltd.
for providing such meals to its customers. Examine whether Flamingo Ltd. can avail ITC on such outdoor
catering service availed by it. [Study Mat]
Answer:
Ü As per Section 17(5)(b)(i) of the CGST Act, ITC on food, beverages, and outdoor catering is generally
blocked.
Ü However, ITC is allowed if these services are used to provide an outward taxable supply of the same
category or as part of a taxable composite/mixed supply.
Ü Since Flamingo Ltd. provides meals as part of passenger transport services, it can claim ITC on outdoor
catering, as it forms an ancillary element of its taxable supply.

QRPs:- Sec 17(5)(b) ITC on catering blocked, except when used for outward supply (same category or
composite/mixed supply).

V’Smart Academy 7.05 CA Vishal Bhattad 09850850800