Expenses › GST on business expenses

GST on business expenses: what you can claim back

Many expenses come with GST in the bill. If you are registered under GST and the expense is for the business, much of that GST comes back to you as input tax credit. Some expenses have no GST at all, and some have GST you can never claim.

Expenses with GST you can usually claim

• Rent of a shop, office or godown from a GST-registered landlord: the bill carries GST and the credit is allowed for business use.
• Phone and internet bills in the business name.
• Repairs and maintenance of the shop and machinery (but not of your own building as construction, and not of cars: see below).
• Professional fees of accountants, lawyers and consultants, advertising, software subscriptions.
• Bank charges: the GST on bank charges shows in the bank statement or the bank's monthly invoice.

For each of these the normal conditions apply: a tax invoice in your name with your GSTIN, the bill showing in your GSTR-2B, and payment to the supplier within 180 days.

Expenses with no GST

• Electricity bills: electricity is exempt from GST.
• Petrol and diesel: outside GST, taxed by VAT and excise, so no credit.
• Salaries and wages to your employees: services by an employee to the employer are not a supply under GST.
• Bank interest on loans, and most government fees.

Expenses whose GST is blocked

Section 17(5) of the CGST Act blocks credit on some expenses even with a correct bill: food and drinks, outdoor catering, club and gym fees, beauty and health services, cars and their repair and insurance (unless you are in that line of business), and gifts. Record the full amount, GST included, as the expense, and do not tick the input tax credit box.

Rent from an unregistered landlord

From 10 October 2024, when a GST-registered business rents commercial property (a shop, office or godown, not a home) from a landlord who is not registered under GST, the tenant pays the GST on the rent under reverse charge (Notification 09/2024-Central Tax (Rate)). The tenant makes a self invoice for it (self-invoice.niveshsahayak.in), pays the GST in cash in GSTR-3B, and can then claim it back as credit. Composition dealers were later taken out of this rule. Ask your accountant if this applies to you.

Entering it here

In Expense, write the full amount you paid. If it includes GST, pick the rate in "GST included in the amount (%)". Tick "I will claim input tax credit on this GST" only when the credit is allowed; the expense book then counts the cost without the GST, and the GST goes to your input credit. If the bill is from another state, tick "Bill from another state (IGST)".