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CA Intermediate · Taxation · Input Tax Credit

Nair Foods, a registered restaurant-supplier in Kochi, is a manufacturer of taxable goods. In a month it incurred the following: (i) GST of Rs 9,000 on motor car (seating capacity 5) bought to be used by its director for personal commuting; (ii) GST of Rs 6,000 on raw materials used in manufacture; (iii) GST of Rs 4,000 on membership of a club for its employees, which is not mandated by law. What is the total ITC available, assuming all other conditions are met?

Only Rs 6,000 is available. The car used for personal commuting and the non-mandatory club membership are blocked under section 17(5), while the credit on raw materials used in manufacturing taxable goods is allowed.

  1. ARs 19,000
  2. BRs 15,000
  3. CRs 6,000Correct
  4. DRs 10,000

Explanation

Motor vehicles for carrying not more than 13 persons are blocked unless used for specified purposes such as further supply, transport of passengers or training; personal commuting does not qualify, so Rs 9,000 is blocked. Club membership is blocked unless obligatory under law, so Rs 4,000 is blocked. Only raw material credit of Rs 6,000 is allowed.

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