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Understanding with reasons, the Specific List of Inward supplies on which Input tax credit is not allowed such as Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, rent a cab, life insurance, health insurance, travel benefits etc with the exceptions. this section is going to be all about
the specific list of supplies it’s the
second item on the negative list which
is there because it does not add any
value now it is a list insider list you
could think of the items on this list as
falling into the category of luxury
goods somewhat you know how luxury goods
work right the government does not
really need to promote or incentivize
luxury goods so these items don’t add
any value and they tend to be more
towards luxury goods there are four main
categories under this list the first one
is again a sub list of six items
generally falling into the category of
food beauty and healthcare there’s an
exception for this list we’ll get to the
details of this list in a bit the second
is on membership of club health and
fitness center so if you have an input
service that you’ve taken for membership
of club health and fitness center then
the access that you pay on such service
you cannot claim input Redditt on such
taxes how would this become an input
service for you if you give it as a
perquisite
to your employees membership fees for
your employees is paid by the company
then it becomes an input service it is
used to motivate employees but the tax
you pay on this falls in the negative
list and you cannot claim it as input
credit for George the third in this
category is rent a cab life insurance
health insurance again it could be
inputs because you provided for your
employees the tax component on these are
not allowed as input tax credit except
in one case we’ll get to the exceptions
in a bit the fourth in this categories
travel benefits extended to employees on
vacation such as leave or home travel
concession well
you would know that LPA is a deduction
allowed under the income tax so this
could fall in the category of no double
tax benefit now examine all four
categories the first one definitely is
consumer facing food beverages health
beauty all of those are consumer facing
and they don’t really add any value to
your product membership of club is just
to motivate employees and not directly
going into any output so is the case
with rent a cab life insurance health
insurance as well as travel benefits and
that’s why this lists the specific list
falls under the category of no value
addition now let’s get into the details
of the first item on the list as I’d
mentioned this is again a sub list of
items there are six items that fall into
this category food and beverages outdoor
catering beauty treatment health
services cosmetic and plastic surgery
all of these will not directly
contribute to value creation except then
the inward supply is used to make
outward supply of the same category what
do you mean by this let’s check out an
example a wholesaler who sells cookies
sells these to a retailer the business
who buys this cookie and plays GST on it
now this business sells the cookies to
customers of its hotel business
now since cookies form part of food and
beverages hortal is also in the same
category it’s an exception to the
negative list and input tax credit would
be allowed let’s take another situation
the wholesaler sells cookie to the
business business pays GST but business
uses these cookies for staff welfare
there is an invert supply but there
isn’t any outward supply ITC will not be
allowed because this falls directly into
the negative list another situation same
example the business will use these
cookies
provide for its customers of health
service business now it isn’t in the
same category
cookies are food and beverages health
service and cookies don’t go along in
the same category and therefore input
tax credit will not be allowed and so
the exception for the first item in the
specific list is that invert supplies
should be used to make an outward supply
of the same category moving on with the
next exception in the list which is in
the third item render cab life insurance
and health insurance with an exception
what is this exception this exception is
in the case where the employer provides
these services to its employees now
there could be two situations why an
employer with provided one because some
law mandates the employer to provide
these services and two no law mandates
him but he just wants to give it as a
perquisite to motivate his employees in
situation one where it is obligatory for
the employer to provide to its employees
then input tax credit is available on
these services while the second case
where no lawman it’s the employer to
provide these services input tax credit
will not be allowed and so the exception
to the third item in the specific list
is that IPC is available on services
which are obligatory for the employer to
provide under any law it need not
necessarily be obligatory only under GST
under any other law in the Indian
Constitution if the employer is required
to provide such services then input tax
credit can be claimed