Skip to content

CA Intermediate · Taxation · Input Tax Credit

Sharma Traders, a registered dealer in Jaipur, purchased a laptop for Rs 80,000 plus 18% GST (Rs 14,400) exclusively for use in its taxable trading business. It also purchased a gift hamper of Rs 10,000 plus 18% GST (Rs 1,800) for distribution to customers as free gifts without any consideration. Assuming all other conditions are met, what is the total ITC that Sharma Traders can claim on these two purchases?

The eligible ITC is Rs 14,400. Credit on the laptop used for business is allowed, but GST on goods given away as free gifts is blocked under section 17(5), so the Rs 1,800 on the hamper cannot be claimed.

  1. ARs 16,200
  2. BRs 14,400Correct
  3. CRs 1,800
  4. DNil

Explanation

ITC on the laptop used for business is allowed: Rs 14,400. Goods given as free gifts are blocked under section 17(5) (goods or services disposed of by way of gift or free samples), so Rs 1,800 is not available. Total ITC = Rs 14,400. Claiming Rs 16,200 wrongly ignores the blocked credit on gifts.

Did you get it right without looking?

One question tells you little. A timed set on Input Tax Credit shows your real accuracy, how long you take and where you lose marks.

Practise Input Tax CreditFree diagnostic mock

More Input Tax Credit questions