The Gujarat GST Appellate Tribunal has ruled that input tax credit (ITC) on insurance of merchandise stock is not barred under Section 17(5) of the CGST Act, as the restriction applies only to insurance of specified conveyances, not general inventory.
GSTAT Allows ITC on Insurance of Merchandise Stock
The Gujarat GST Appellate Tribunal (GSTAT) has held that input tax credit (ITC) on insurance premiums paid for merchandise stock is not blocked under Section 17(5) of the CGST Act, 2017. The decision resolves ambiguity regarding the scope of ‘blocked credits’ concerning insurance of goods in transit or storage.
The dispute arose when the revenue denied ITC on insurance of stocked goods, invoking Section 17(5)(b), which blocks credit for insurance, servicing, and repairs of motor vehicles, vessels, and aircraft ‘liable to be used for transportation of passengers’. The Tribunal distinguished inventory insurance from vehicle-related cover, noting that the restriction is confined to conveyances used for passenger transport and does not extend to insurance of goods or stock-in-trade.
Section 17(5)(b) speaks only of insurance of vehicles, vessels and aircraft when used for transportation; it does not encompass insurance of goods carried in such conveyances.
The Tribunal cited the principle of strict construction of prohibitory provisions and referred to the legislative intent behind the blocked credit list — to prevent misuse in sectors with high ITC claims. The ruling benefits traders and manufacturers who insure inventory against loss or damage during logistics. Legal teams should now clearly segregate ITC claims for goods insurance from those on conveyances in reconciliation and audit.
Citations
- CGST Act, 2017, Section 17(5)(b)
