Section 17 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The clause is short and the outcome is binary. Below the threshold, no credit. At or above it, credit like any other asset.
Credit is not available on motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) — except when used for (A) further supply of such motor vehicles, (B) transportation of passengers, or (C) imparting training on driving such motor vehicles. A vehicle with fourteen seats or more, or one not for transportation of persons, is outside the clause entirely.
The threshold
"Approved seating capacity of not more than thirteen persons (including the driver)."
- 13 or fewer including the driver — blocked, unless an exception applies.
- 14 or more including the driver — not covered by the clause at all. Credit is available on the ordinary s.16 and s.17(1)/(2) tests.
"Approved seating capacity" means the capacity approved by the registering authority and recorded in the registration certificate. It is not the number of seats fitted, not the manufacturer's brochure figure, and not the number of people actually carried.
So a 15-seat tempo traveller registered with an approved capacity of 15 is outside the clause. A 7-seat SUV is inside it.
"For transportation of persons"
The clause covers motor vehicles for transportation of persons. A vehicle designed and registered for goods carriage is not covered.
So credit is available, without needing any exception, on:
- trucks, tempos and goods carriers;
- dumpers, tippers and tankers registered as goods vehicles;
- forklifts and material handling equipment that are not motor vehicles for transporting persons.
"Motor vehicle" takes its meaning from s.2(76) of the CGST Act, which adopts s.2(28) of the Motor Vehicles Act, 1988 — any mechanically propelled vehicle adapted for use upon roads, excluding a vehicle running upon fixed rails, a vehicle of a special type adapted for use only in a factory or other enclosed premises, and a vehicle with less than four wheels fitted with an engine capacity not exceeding twenty-five cubic centimetres.
That exclusion for vehicles adapted for use only in a factory or enclosed premises is useful: an in-plant vehicle that never goes on a road is not a motor vehicle at all.
The three exceptions
(A) Further supply of such motor vehicles. A car dealer's stock. The vehicle is inventory, and credit is available.
(B) Transportation of passengers. A taxi operator, a bus operator, a rent-a-cab business supplying transport. The vehicle is used to make an outward taxable supply of passenger transport.
(C) Imparting training on driving such motor vehicles. A driving school.
Each exception is about what the vehicle is used for, and each requires the use to be for making a taxable supply. A car used to transport the company's own employees is not "transportation of passengers" — there is no outward supply of passenger transport.
Where businesses get it wrong
Employee transport. A company car used to ferry staff is blocked. It is not making an outward supply of passenger transport.
Sales team vehicles. Blocked. Used in the course of business, but that is irrelevant — the clause opens with a non-obstante over s.16(1).
Vehicles used for goods movement but registered for persons. The registration category governs. An SUV used to carry samples is still a vehicle for transportation of persons.
Demo vehicles at a dealership. Contested. Where the demo car is eventually sold as a used vehicle, the "further supply" exception is arguable; where it is retained beyond the demo period, it is weaker. Advance rulings differ.
Vehicles supplied on lease by the owner. Where the registered person's business is leasing motor vehicles, that is not one of the three exceptions on its face — the exceptions are further supply, passenger transport and driving training. A leasing business supplying the right to use a vehicle should look at whether the transaction is a further supply of the vehicle.
What is not blocked by clause (a)
- vehicles with 14 or more approved seats;
- goods carriage vehicles;
- vessels and aircraft — covered separately by clause (aa);
- insurance, servicing and repair of vehicles — covered separately by clause (ab);
- leasing, renting or hiring of vehicles — covered separately by clause (b)(i).
The four clauses interlock. A blocked vehicle under (a) drags its insurance and repairs into (ab), and its hire into (b)(i). A vehicle outside (a) — say a 20-seat bus — takes its insurance, repairs and hire out of those clauses too. Section 17(5)(ab): insurance, servicing and repair →
Key takeaways
- Blocked: motor vehicles for transportation of persons with approved seating capacity of 13 or fewer including the driver.
- 14 or more seats is outside the clause entirely.
- Goods carriage vehicles are outside the clause.
- Three exceptions: further supply, transportation of passengers, driving training.
- Each exception requires use for making a taxable supply.
- Approved seating capacity is the registration figure, not the seats fitted.
Read next
- Blocked ITC Under Section 17(5)
- Section 17(5)(ab): Insurance, Servicing and Repair
- Section 17(5)(aa): Vessels and Aircraft
- Section 17(1) and 17(2): Two Apportionments
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Blocked Credit under GST (November 2025).