GST Credit on -COST allocation to Other unit -head of ineligible Credit items

[Prem Choudhary]

Dear Expert

please advice on input tax credit is eligibility , One Manufaturing Company has 5 manufaturing units in different states and all unit has maintaining separate books and return in GST . And every month each unit is raising tax invoice on other units for cost incurred / facilities provided to employee of other units by using 'SAC -998599 Other Support Service'. However in Cost allocation invoice the component of following cost is also included :-

1. Taxi Hire charges:- ( providing unit has paid GST under RCM)
2. Fooding charges
3. Hotel bills
4. Medical support etc

please advice other unit can eligible of ITC of all components under Other Support Service.

[KASTURI SETHI]

Point-wise reply is as under:-

1. Not admissible

2 .Not admissible

3. Allowed for official purpose/function only.

4. Not admissible

This is my view.

[Ganeshan Kalyani]

Only credit on hotel bill is eligible.

[KASTURI SETHI]

Dear Querist,

In continuation of my reply dated 21.2.19, it is informed that Section 17(b) of CGST Act, 2017 has been amended substantially vide CGST (Amendment) Act, 2018w.e.f. 1.2.2019 which is as under :-

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

It is further clarified that that law may be State subject or Central subject. This amendment can be helpful to you, if you make efforts in the light of this latest amendment.

[Prem Choudhary]

Thank you for reply,

Sir i want highlight that in case of Taxi hire charges GST is paid by providing units under RCM and debited to COST and Cost of Taxi hire allocate to other unit in SAC - 998599 'Other Support Services".. . The other unit has filling the return and paid IGST as Other Support Services in GSTR-1.

Our query is, whether COST recipient state can eligible IGST Credit (paid by other unit) .

And amendment in Sec-17(5) is not applicable because this service is not obligatory in other Law..

[KASTURI SETHI]

Refer to your query dated 22.2.19, you are not eligible.

[DR.MARIAPPAN GOVINDARAJAN]

You are not eligible as advised by Shri Sethi.

[Ganeshan Kalyani]

In my view, the credit should be eligible. The backing for my view is that the unit has paid GST on invoice raised to another unit as 'other support service'. that unit cannot be said to be providing rent-a-car service..

AI Summary

Input tax credit eligibility on inter-unit cost allocations often denied for service components like taxi, food and medical. Recipient units generally cannot claim ITC on inter-unit cost allocations invoiced as Other Support Services where components include taxi hire (GST paid by provider under reverse charge), fooding and medical support; hotel bills may be allowable when for official functions. An amendment permits ITC if an employer is legally obliged to provide the service, but that exception does not apply where no statutory obligation exists. A minority view supports eligibility on the basis that the supply is Other Support Services rather than a rent-a-car service.