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.
Clause (c) blocks a service — works contract services. Clause (d) blocks everything.
Credit is blocked on goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account, including when such goods or services or both are used in the course or furtherance of business. That last phrase is the point of the clause — it forecloses the argument that business use ought to preserve the credit. Explanation 1 brings in re-construction, renovation, additions, alterations and repairs, to the extent of capitalisation. Explanation 2, inserted retrospectively in 2025, deems "plant or machinery" to have always meant the defined "plant and machinery".
Why the clause is drafted the way it is
Section 16(1) grants credit on supplies used or intended to be used in the course or furtherance of business. A person constructing a factory, an office or a hotel is plainly acting in the course of business.
So clause (d) had to say the quiet part out loud: the block applies "including when such goods or services or both are used in the course or furtherance of business."
That phrase is not decorative. It is the answer to the most natural argument a taxpayer would otherwise make.
What "on his own account" means
The block applies where the person constructs for himself — building an asset he will own and use, rather than supplying construction to someone else.
On own account:
- a manufacturer building its own factory shed;
- a company constructing its head office;
- a hotel group building a hotel it will operate;
- a mall developer constructing a mall it will let out;
- a warehousing company building its own warehouse.
Not on own account:
- a contractor constructing for a client — the contractor is supplying works contract service, and clause (c)'s chain exception applies;
- a developer selling units under construction — supplying construction service under Schedule II paragraph 5(b), governed by the real estate rate notification's own credit conditions rather than by clause (d).
The distinction between the mall developer who lets and the developer who sells is what produced the Safari Retreats litigation. Explanation 2 and Safari Retreats →
What is blocked
Everything received for the construction:
- cement, steel, bricks, sand, aggregates;
- tiles, fittings, sanitaryware, false ceilings;
- electrical and plumbing materials;
- architectural, structural and design services;
- project management consultancy;
- site supervision;
- labour supply for construction;
- and works contract services — which are separately blocked by clause (c).
The two clauses overlap deliberately, so that neither a works contract route nor a direct procurement route preserves the credit.
Explanation 1: repairs and renovation, to the extent of capitalisation
"For the purposes of clauses (c) and (d), the expression 'construction' includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property."
Two things follow.
Repairs and renovation are within "construction" — so a major office refit is caught by the same block as new construction.
Only "to the extent of capitalisation." Expenditure charged to the profit and loss account as revenue repairs is not within the definition, and the credit is available.
That makes the accounting treatment decisive, which is unusual in GST. A repair capitalised under Ind AS 16 because it enhances future economic benefits is blocked; the same nature of work expensed as routine maintenance is not.
The corollary: the capitalisation decision is a tax decision, and it should be made with both consequences visible. To the extent of capitalisation →
What is not blocked
Plant and machinery, on the defined meaning — apparatus, equipment and machinery fixed to earth by foundation or structural support, including such foundation and structural supports, but excluding land, buildings, other civil structures, telecommunication towers, and pipelines laid outside the factory premises. The plant and machinery definition →
Movable property. The block relates to immovable property. Furniture, loose equipment, IT hardware and vehicles are not construction of immovable property.
Revenue repairs, not capitalised.
Interior work on leased premises, to the extent expensed rather than capitalised. Where a lessee capitalises a fit-out as leasehold improvement, Explanation 1 brings it within "construction" and the block applies.
Practical notes
- Tag construction spend at the purchase order stage, so blocked credit is never taken and then reversed with interest.
- Split EPC and turnkey contracts into plant and machinery scope and civil scope at award, with separate values.
- Align the capitalisation policy and the GST position. Finance capitalises; tax bears the consequence.
- Leasehold improvements need a deliberate decision on capitalisation.
- Do not rely on the functionality test. Explanation 2 has removed it for clause (d), retrospectively.
- Blocked construction GST should be capitalised with the asset, since it is non-recoverable — which also means s.16(3) is engaged and the credit cannot later be claimed. Section 16(3): depreciation on the tax component →
Key takeaways
- Clause (d) blocks all goods and services received for own-account construction of immovable property.
- It applies even where used in the course or furtherance of business — expressly.
- Plant and machinery is carved out on the defined meaning only.
- Explanation 1: repairs, renovation and alterations are "construction" to the extent of capitalisation.
- Explanation 2 removes the functionality test, retrospectively from 01.07.2017.
- Revenue repairs and movable property are outside the block.
Read next
- Explanation 2: How the 2025 Amendment Overruled Safari Retreats
- Section 17(5)(c): Works Contract Services
- The Plant and Machinery Definition
- To the Extent of Capitalisation: Repairs and Renovation
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).