Blocked Credit Under GST —
Section 17(5) Explained
The complete list of goods and services on which Input Tax Credit is blocked under Section 17(5) of the CGST Act — with the exceptions, the same-business rule and how to report ineligible ITC.
Section 17(5) of the CGST Act 2017 lists specific goods and services on which Input Tax Credit is blocked — even when they are used for business and GST has been correctly paid. The main blocked items are motor vehicles (≤13 seats), food & beverages, health & life insurance, rent-a-cab, membership of clubs, works-contract / construction of immovable property, CSR spend, and goods lost, stolen, gifted or given as free samples. A few have exceptions — mainly the same-business rule.
Blocked Credits Under Section 17(5) — Full Table
Every category on which ITC is denied, the clause, and the narrow exception (if any). See the wider ITC eligibility rules for what you can claim.
| Blocked item | Clause | ITC? | Exception |
|---|---|---|---|
| Motor vehicles & conveyances (≤13 seats, incl. driver) | 17(5)(a) | No | Further supply (dealers), passenger transport (taxi/bus), driving training, goods transport |
| Vessels and aircraft | 17(5)(aa) | No | Further supply, transport of goods/passengers, navigation/flying training |
| General insurance, servicing, repair & maintenance of those vehicles/vessels/aircraft | 17(5)(ab) | No | Same exceptions as the vehicle itself; or manufacturer / insurer of such vehicles |
| Food & beverages, outdoor catering, beauty treatment, health services, cosmetic & plastic surgery | 17(5)(b)(i) | No | Same category is your taxable outward supply; or obligatory for the employer under a law |
| Membership of a club, health & fitness centre | 17(5)(b)(ii) | No | No general exception |
| Rent-a-cab, life insurance, health insurance | 17(5)(b)(i) | No | Obligatory under a law in force; or supplier in the same line of business |
| Travel benefits to employees on vacation (LTA / LTC) | 17(5)(b)(iii) | No | No general exception |
| Works-contract service for construction of immovable property | 17(5)(c) | No | Input service for a further works-contract supply (sub-contractor); or plant & machinery |
| Goods/services for construction of immovable property on own account | 17(5)(d) | No | Plant & machinery is excluded — ITC allowed on P&M |
| Tax paid under composition scheme (Sec 10) | 17(5)(e) | No | No exception |
| Goods/services used for CSR under Sec 135, Companies Act 2013 | 17(5)(fa) | No | No exception — blocked by Finance Act 2023 |
| Goods/services for personal consumption | 17(5)(g) | No | No exception |
| Goods lost, stolen, destroyed, written off, or given as gift / free sample | 17(5)(h) | No | No exception |
| Tax paid after detention/demand under Sec 74, 129, 130 | 17(5)(i) | No | No exception (fraud / confiscation cases) |
CGST Act 2017, Section 17(5). Blocked credit is unaffected by the GST 2.0 rate rationalisation (eff. 22 Sep 2025) — the reform changed rates, not ITC-blocking rules.
When ITC is blocked you cannot set that GST off against your output liability. The tax is added to the purchase cost — capitalised on a fixed asset (and depreciated) or expensed to the P&L. Wrongly claiming it invites reversal with 18% p.a. interest under Section 50 and penalty under Section 74 / 122.
Motor Vehicles — When Is ITC Allowed?
ITC on a car or other motor vehicle with seating capacity of 13 or fewer (including the driver) is blocked under Section 17(5)(a). It is allowed only in four situations:
- Further supply of vehicles — car and two-wheeler dealers.
- Transportation of passengers as a taxable service — taxi operators, cab fleets, buses.
- Imparting driving training — driving schools.
- Transportation of goods — trucks, tempos and goods carriers (never blocked).
A company buying a car for an employee's commute or executive use, or hiring rent-a-cab for staff transport, cannot claim the ITC — even though the spend is a genuine business cost. The credit opens up only if providing that cab service is obligatory under a law in force, or you are yourself in the cab / vehicle business.
CSR Expenditure — Now Explicitly Blocked
Earlier there was ambiguity on ITC for goods/services procured for Corporate Social Responsibility. The Finance Act 2023 inserted clause (fa) in Section 17(5), expressly blocking ITC on anything used for CSR activities under Section 135 of the Companies Act 2013 — sponsorships, goods distributed to beneficiaries, construction of schools or facilities under CSR, and similar spend.
Not sure whether a purchase is blocked or eligible? Get your ITC register reviewed.
Talk to a GST Expert →The Same-Business Rule
The most practically useful carve-out: if the very goods or service that would otherwise be blocked is itself the taxable outward supply of your business, ITC is allowed.
- A restaurant / hotel buying food ingredients — food is its output
- A cab or bus operator buying passenger vehicles
- A driving school buying cars for training
- A car dealer buying vehicles for resale
- An insurer paying for reinsurance / insurance inputs
- A works-contractor engaging a sub-contractor for onward supply
Construction of Immovable Property
ITC on works-contract services and on goods/services used to construct immovable property on your own account is blocked under 17(5)(c) and 17(5)(d) — the building is a capital asset, not consumed in taxable supply.
ITC not available
- Office building / factory shed constructed for own use
- Interior civil works & fit-outs capitalised to the building
- Works-contract for a new immovable structure
ITC available
- Plant & machinery (explicitly excluded from the block)
- Sub-contractor supplying a further works-contract
- Repairs charged to P&L (not capitalised to the property)
Budget 2025 aligned the wording of 17(5)(d) to "plant and machinery" to match 17(5)(c), overriding the Safari Retreats reading — telescopic / functionality tests for buildings are no longer available.
How to Report Blocked Credit in GSTR-3B
Ineligible ITC under Section 17(5) must not be carried into your net credit. When an invoice auto-populates, the blocked portion is reversed / reported in Table 4(B)(1) of GSTR-3B so it never hits the electronic credit ledger.
The blocked GST is not lost for income-tax: added to an asset it is depreciated, and charged to the P&L it is a deductible expense under the Income Tax Act 2025 (erstwhile 1961). Good tagging at the invoice stage prevents both wrongful ITC and audit disputes later.
Want your ITC register cleaned up and 17(5) items correctly reversed?
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