[Samurai]

Well, ITC for company owned vehicles used by employees was not allowed even by the pre-amendment clause. Since it was being misused, they further clarified it.

Employees are not paying passengers, nor are being imparted training, nor transporting goods. For example, my GV is company owned. But I don't see how it qualifies for exemption under pre-amendment 17.5(a).

[rdst_1]

Originally Posted by Samurai

If you are consuming something, then there is no ITC for it.

That is what I thought too. And I agree with you, that must be the rule. But as you can see, people have mentioned here, that they have been claiming ITC for anything they purchase for their business. The concept of GST, means that you get ITC only on services and products you sell and add value to. Only if you are adding value to something can you claim ITC for the raw materials you are using. But, all this becomes a little confusing.
For example, do you claim ITC on the computers you have purchased. Or for a software you have purchased that you use to write another software with. Technically, since you aren't adding value to that particular software and selling the enhanced product, you shouldn't be claiming ITC on it. But, I doubt, many would agree with this and they would apply for an ITC for the software since they are in the software business.

[itwasntme]

Originally Posted by Samurai

You are already getting income tax exemption on business expenses, now you want sales tax (GST) exemption too?

Add depreciation benefits too.

[srh]

Originally Posted by rdst_1

But why?
Especially when an office car is considered a basic perk and given to almost all government officers over a certain rank. And we all know even they flout the norms and use those cars for personal use as well. Then why isn't a business owner allowed the same perk as even he will be using the car mostly for official reasons. If I am going for a meeting with a client, isn't that for 'furthering my business'. If I would take a cab or a flight instead, that is definitely allowed as a business expense.

Government officials are not supposed to use their vehicles for personal use. Their flouting of norms does not mean you give a free run to everyone else. And then government disallowing/ allowing GST to itself makes no difference - one pocket to another

Secondly, government officials don't get fancy luxury cars.

[AbhiJ]

After a discussion with my auditor, I was under the impression that I can claim ITC on anything that logically furthers / helps the business. This is a grey area at best, and a lot will depend on whether you are assessed and whether the assessment officer shares your opinion.

Originally Posted by Samurai

You are already getting income tax exemption on business expenses, now you want sales tax (GST) exemption too?

IT Exemption of Business Expenses ... As in Business expenses lowers the Business profits?

If you buy a car, all you get is a 15% per annum depreciation from Income Tax point of view. Nothing else that I am aware of.

[Hayek]

This seems to just be a clarification. At least in our company, we have not been claiming Input Tax Credit on Insurance Premia or Maintenance costs on Company Owned cars that are allotted to employees.

Yes, this is not in keeping with the concept of GST - as a tax levied only on final supply of consumption goods and services. But at least on automobiles, that has always been the case - which is why you had the Cess on cars. The bigger question on company owned cars is how do they fit in with respect to GAAR. Yes, the law provides that people are assessed a perk value of ₹ 1800 per month for personal use of an official car. But is it really GAAR compatible that you can buy a X3 worth ₹ 55 l or even an Aston Martin worth ₹ 5 crore and use it for personal purposes (in addition to the odd drive for a business meeting) for just ₹1800 per month? So far, tax advisers seem to be saying it is. But I suspect this will not last beyond a budget or two.

[Samurai]

Originally Posted by rdst_1

For example, do you claim ITC on the computers you have purchased. Or for a software you have purchased that you use to write another software with. Technically, since you aren't adding value to that particular software and selling the enhanced product, you shouldn't be claiming ITC on it. But, I doubt, many would agree with this and they would apply for an ITC for the software since they are in the software business.

You are assuming software/hardware is for our consumption. No, it is used to provide the service. Just like a bus is used by the bus company to provide transportation to customers. That is why we get ITC for it.

Originally Posted by itwasntme

Add depreciation benefits too.

Yes, that too.

Originally Posted by AbhiJ

IT Exemption of Business Expenses ... As in Business expenses lowers the Business profits?

Business expense is pre-tax, while personal expenses are post-tax. This is a huge benefit businesses are already getting. Take an individual who is already deep in 30% IT category. To buy a 7L car, he has to pay 30% tax on 10L and then use the remaining 7L to buy that car. A business can buy the same car for 7L, and spend the 3L on something else. Plus, every year it will get depreciation break on the car asset price. The individual doesn't get depreciation either. So businesses can buy consumption items before tax and get depreciation every year, unlike an individual buyer.

Originally Posted by Hayek

This seems to just be a clarification.

Exactly, this is merely a clarification because folks were exploiting the letter of law, instead of going by the spirit of the law.

Originally Posted by AbhiJ

After a discussion with my auditor, I was under the impression that I can claim ITC on anything that logically furthers / helps the business. This is a grey area at best, and a lot will depend on whether you are assessed and whether the assessment officer shares your opinion.

Your auditor was going by the letter of law, which means exploiting the slight vagueness in the way law was written. But if one understands GAAP, the spirit of the law is crystal clear. The spirit of the law is that businesses shouldn't pay sales tax on product/services they merely resell.

Example, suppose I am in the grass-cutting business:

1) I buy a grass-cutting machine. Exemption applies, since it was bought to provide service.
2) I buy a car to take me to the customer location. Hmm, things get murky here. This is when a good auditor applies GAAP, to interpret the spirit of the law. The car can be used for everything, especially personal trips. The only real business use case is the trip to the customer location. So, only the petrol expense for the trip can really qualify for exemption. Amortizing the car cost for each business trip over life of the car is not something any accountant/auditor will attempt. How do you separate business trips from personal trips? Who is going to keep track? So exemption on the car is clear only if the car is used to provide service, otherwise you are exploiting the letter of the law.

So as Hayek correctly said, this is merely an clarification to people who were exploiting the vagueness of the law. Auditors who understood and implemented the law using GAAP never required this clarification.

[rdst_1]

Originally Posted by Samurai

You are assuming software/hardware is for our consumption. No, it is used to provide the service. Just like a bus is used by the bus company to provide transportation to customers. That is why we get ITC for it.

If you are service based company, then sure. My example was based for a product based company. Say a company makes a software which it sells. Then, I guess, the company can only claim ITC for the mode of delivery of the software. In that case, both the hardware and software you buy and use will be for your consumption. I am guessing most companies would still go ahead and claim ITC for their hardware.
I was told this when I was purchasing machines for my dairy farm. I can't claim ITC for a machine used at my farm. I can only claim ITC for the packaging material that I buy to package the product or for the raw materials. Can't claim ITC for the machinery as I am not adding value to the machines and reselling them.

[Turbanator]

Originally Posted by rdst_1

I can't claim ITC for a machine used at my farm. I can only claim ITC for the packaging material that I buy to package the product or for the raw materials. Can't claim ITC for the machinery as I am not adding value to the machines and reselling them.

Can you share relevant rules or some notification? In fact even under CENVAT rules, you could have claimed Excise benefits if you had bought the machinery for manufacturing and your end product was also excisable.

Under GST, I am sure you can claim ITC not just on the machinery but also office Sofa/ Chairs and Air conditioner that you may have bought for the office.

This should clear some of your doubts.

Constructing an immovable property on own account
No ITC is available for goods/services for construction of an immovable property on his own account. Even if such goods/services are used in the course or furtherance of business, ITC will not be available.

But this rule does not apply to plant or machinery. ITC is available on inputs used to manufacture plant and machinery for own use.

Example-

Ajay Steel Industries constructs an office building for its headquarters. ITC will not be available.
Ajay Steel Industries also constructs a blast furnace to manufacture steel. ITC is available since it is a plant.


https://cleartax.in/s/gst-cases-wher...is-unavailable

[evilminstrel]

Originally Posted by rdst_1

But why?
Especially when an office car is considered a basic perk and given to almost all government officers over a certain rank. And we all know even they flout the norms and use those cars for personal use as well. Then why isn't a business owner allowed the same perk as even he will be using the car mostly for official reasons. If I am going for a meeting with a client, isn't that for 'furthering my business'. If I would take a cab or a flight instead, that is definitely allowed as a business expense.

I agree, I have driven my car around 40K and 90% of it would be for the business purpose (I mean even going to your own office should be the business purpose right? That is an expense in furtherance of business!). Whereas for salaried people, there are laws in place like Gratuity, Exgratia, Medical benefits, etc. the least a businessman or entrepreneur may be allowed to have nontaxable business expenses.

[rdst_1]

Thanks. Looks like I was guided incorrectly. Thankfully, I haven't bought any machinery yet. Only completed the construction part yet.
I just read up and it's going to be a lot complicated for me to claim ITC as most of my products are exempt from GST with only 2 products in the GST category. There is a concept of common credit for those cases.
In the grass cutting example above, the concept of common credit will be applicable as well.
https://cleartax.in/s/itc-rules-for-...edit-under-gst

[Hayek]

Originally Posted by evilminstrel

going to your own office should be the business purpose right? That is an expense in furtherance of business

Not true. Travel from residence to place of work is not business purpose. Please check with your tax advisor before claiming such expenses. The change in income tax assessment to an anonymous e assessment basis is going to be quite interesting. Should make managing your assessment much tougher

[DeepakS]

While there is no ITC on vehicles used in business.
There certainly is ITC for other expenses on goods or services used for running a business.
For instance i claim ITC on the GST levied on my broadband connection, computers, cellphones, etc items purchased under firm's name for using in business.
I bought an induction cooktop for the office pantry and got the ITC for the GST levied on the same. If your paper work is solid(genuine) then i think you can claim ITC on anything regarding to business unless specified otherwise.

[stanjohn123]

Originally Posted by DeepakS

While there is no ITC on vehicles used in business.
There certainly is ITC for other expenses on goods or services used for running a business.
For instance i claim ITC on the GST levied on my broadband connection, computers, cellphones, etc items purchased under firm's name for using in business.
I bought an induction cooktop for the office pantry and got the ITC for the GST levied on the same. If your paper work is solid(genuine) then i think you can claim ITC on anything regarding to business unless specified otherwise.

I actually didn't know this till now. I have my own hospital, but how do I purchase things in hospital name if I am purchasing it online ? Till now everything including broadband connection has been taken in my personal name but in hospital address.

[rdst_1]

Originally Posted by stanjohn123

I actually didn't know this till now. I have my own hospital, but how do I purchase things in hospital name if I am purchasing it online ? Till now everything including broadband connection has been taken in my personal name but in hospital address.

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