Section 17(5) of Central Goods & Services Tax Act, 17 (for brevity CT Act) deals with blocked credits. The said section starts with non-obstinate clause overriding the general provisions of Section 16 of CT Act which deals with credit entitlements. In other words, despite of the fact that a particular goods or input services is used for furtherance of business, the credit of tax paid on such items shall not be entitled if such item is mentioned vide Section 17(5). In this article, we try to analyse, the sub-section (h) of Section 17(5) with the help of certain recent advance rulings.
Section 17(5)(h) states that input tax credit shall not be available with respect to goods lost, stolen, destroyed, written off or disposed by way of gift or free samples. That is to say, if a supplier who has purchased certain goods and disposed the same by way of gift or free samples, the supplier is not entitled to take credit despite of the fact such gifts or free samples would yield additional business to the supplier. With the above basics in place, let us proceed to examine certain advance rulings to better understand the ambit of Section 17(5)(h).