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CA Intermediate · Taxation · Input Tax Credit

Kaveri Enterprises, a registered manufacturer in Pune, is liable to pay GST on its outward taxable supplies. In March, it bought the following: (i) raw materials for Rs 3,00,000 + GST Rs 54,000 for use in taxable goods; (ii) a motor car (seating capacity 5) for Rs 8,00,000 + GST Rs 2,24,000 for use by directors, not for any specified purpose; (iii) food and beverages for the staff party, GST Rs 6,000. All tax invoices were received and goods were received. Assuming all other conditions are met, what is the maximum ITC available for March?

The maximum ITC is Rs 54,000, on the raw materials only. GST on the car is blocked because it is a motor vehicle for fewer than 13 persons not used for a specified purpose, and GST on staff party food and beverages is also blocked.

  1. ARs 54,000Correct
  2. BRs 60,000
  3. CRs 2,78,000
  4. DRs 2,84,000

Explanation

Raw materials ITC of Rs 54,000 is allowed. ITC on motor vehicles for carrying not more than 13 persons is blocked unless used for specified purposes such as further supply, passenger transport or training, so Rs 2,24,000 is blocked. Food and beverages are blocked unless the outward supply of the same category is taxable, which does not apply to a staff party, so Rs 6,000 is blocked. Option B wrongly adds the food tax.

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