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CMA Intermediate · Direct and Indirect Taxation · Input Tax Credit

Bharat Logistics Ltd, a registered goods transport firm making taxable supplies, incurs GST of: (a) Rs 50,000 on a new aircraft used to transport its goods; (b) Rs 12,000 on general insurance of that aircraft; (c) Rs 8,000 on a health and fitness centre membership for employees, not obligatory under any law; (d) Rs 15,000 on food and beverages for a staff party, not resold. Which total credit is eligible?

Rs 62,000 is eligible. An aircraft used for transporting goods is outside the block, and its general insurance is also allowed because the aircraft is used for the permitted purpose. Fitness centre membership and food and beverages are blocked, as no exception applies to these.

  1. ARs 62,000Correct
  2. BRs 50,000
  3. CRs 85,000
  4. DRs 70,000

Explanation

Aircraft used for transportation of goods is excepted from the block in section 17(5)(aa), so Rs 50,000 is allowed. Insurance of that aircraft is allowed under the proviso to clause (ab) since the aircraft is used for the specified purpose: Rs 12,000. Club or fitness membership (Rs 8,000) and food and beverages for a staff party (Rs 15,000) are blocked. Total = Rs 62,000.

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