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CA Intermediate · Taxation · Input Tax Credit

Sunrise Hotels, a registered person, incurred the following GST in a month: (i) GST of Rs 20,000 on food and beverages supplied to its staff free of charge as a gratuitous benefit, not required by law; (ii) GST of Rs 30,000 on raw materials used in taxable outward supplies; (iii) GST of Rs 15,000 on membership of a health club for its employees, where it is not obligatory under any law. Total ITC eligible is:

Eligible ITC is Rs 30,000. Tax on free food and beverages for staff and on health club membership, not obligatory under any law, is blocked under the negative list of section 17(5). Only tax on raw materials used for taxable supplies qualifies for credit.

  1. ARs 65,000
  2. BRs 30,000Correct
  3. CRs 50,000
  4. DRs 45,000

Explanation

Food and beverages for staff (not obligatory by law, and not for outward supply of the same category) and club or health membership are blocked credits under section 17(5). Only the Rs 30,000 on raw materials is eligible. Option C allows the health club wrongly.

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