Can You Claim GST on a Company Car or Office Construction? The Blocked Credit List Explained
Input tax credit is blocked on passenger vehicles seating up to 13, their insurance and repairs, unless used for transport business, resale or driver training, and on construction of buildings, including works contracts. Credit is allowed on goods vehicles and on plant and machinery, including its foundations.
"We paid GST, so we get the credit" is not always true. Section 17(5) of the CGST Act lists items where credit is blocked even if they are used for business. The two most expensive mistakes involve vehicles and buildings.
Vehicles
Credit is blocked on motor vehicles for carrying passengers with seating for 13 or fewer people (including the driver), and on their insurance, servicing and repair, unless the vehicle is used for:
- ✓further supply of such vehicles (for example, a car dealer);
- ✓transporting passengers as a business (taxi, bus operators);
- ✓training people to drive.
Credit is allowed on vehicles used to transport goods, such as trucks and delivery vans.
| Purchase | Credit? |
|---|---|
| Sedan for the managing director | No |
| 12-seater van for staff transport | No, unless staff transport is your business or legally required (check) |
| Goods carrier truck | Yes |
| Car bought by a car dealer to sell | Yes |
Construction
Credit is blocked on:
- ✓works contract services for building an immovable property (other than plant and machinery);
- ✓goods and services used to construct an immovable property on your own account, even for business use.
So the cement, steel and contractor's GST for a new office or factory shed are not creditable. Credit is available on plant and machinery, including foundations and structures that support them, but not land, buildings or pipelines outside the factory.
Repairs that are expensed in your books, not capitalised, are generally not blocked.
Other blocked items
- ✓Food and beverages, outdoor catering, health and beauty services, life and health insurance (unless legally required)
- ✓Club, health and fitness memberships
- ✓Travel benefits for employees on vacation
- ✓Goods lost, stolen, destroyed, written off or given as gifts or free samples
- ✓Goods or services for personal use
- ✓Tax paid under the composition scheme, and tax paid on demands involving fraud
A worked example
A Sanand manufacturer builds a ₹2 crore factory shed and installs ₹5 crore of machinery. GST on the shed's contractor and materials (about ₹36 lakh) is blocked. GST on the machinery and its foundation (about ₹90 lakh) is claimed.
Frequently asked questions
What about a car taken on lease?
Leasing or renting of such vehicles is also blocked, with the same exceptions.
Can I claim credit on hotel stays for business travel?
Yes, if the hotel invoice carries your GSTIN in that state. Leisure travel for employees is blocked.
Is the GST on a building's furniture blocked?
Movable furniture is not part of the building, so credit is generally available.
Sources
This is a summary, not legal advice. Confirm with your chartered accountant.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
LinkedIn profile →