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CA Intermediate · Taxation · Input Tax Credit

Kapoor Foods Ltd, a registered manufacturer of taxable goods, bought the following inputs during a month, with IGST/CGST paid: (i) Rs 18,000 GST on goods used in its factory; (ii) Rs 9,000 GST on a gift hamper distributed free to dealers as a promotion; (iii) Rs 6,000 GST on food and beverages for staff, not required by any law to be provided; (iv) Rs 12,000 GST on a motor car used only for transporting employees. Assume all invoices are valid. What is the ITC eligible?

Only Rs 18,000 is eligible. Credit on goods given as free gifts, non-mandatory staff food and beverages, and a motor car used simply to carry employees is blocked under the blocked credit provisions, leaving only the input used in manufacture.

  1. ARs 18,000Correct
  2. BRs 30,000
  3. CRs 27,000
  4. DRs 45,000

Explanation

Free gifts are lost for ITC under the section on goods lost, stolen, destroyed or disposed of by way of gift. Staff food is blocked unless mandated by law. Motor vehicles for carrying persons with seating capacity up to 13 are blocked, except for specified purposes such as transportation of passengers. Only the factory input credit of Rs 18,000 is allowed.

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