GST Section 17(5): Blocked Input Tax Credits — Complete List

Why ITC gets blocked

Section 17(5) of CGST Act lists categories of inward supplies where Input Tax Credit (ITC) is BLOCKED — meaning GST paid on these purchases cannot be claimed back. The rationale is to prevent personal/non-business expenditure from being subsidized by ITC.

Wrongly claimed blocked ITC must be reversed with interest. Major audit focus area.

Motor vehicles (17(5)(a))

ITC on motor vehicles is BLOCKED unless used for:

• Further supply (e.g., car dealer selling cars — ITC allowed)
• Transportation of passengers (e.g., taxi business — ITC allowed)
• Transportation of goods (e.g., logistics company — ITC allowed)
• Driving instruction (driving schools)

Examples of blocked:

• Company buying SUV for director's use — BLOCKED
• Sales team's pool cars — BLOCKED
• Goods carriage (small trucks for own goods) — ALLOWED

Food, beverages, club memberships (17(5)(b))

ITC BLOCKED on:

• Food and beverages (restaurant bills, canteen expenses)
• Outdoor catering
• Beauty treatment, health services
• Cosmetic and plastic surgery
• Health and fitness centres (gym, club memberships)
• Life and health insurance (with exception — see below)

Exception (ALLOWED ITC):

• If these are obligatory under any law to provide to employees (e.g., factory canteen for 250+ workers under Factories Act, ESI medical) — ITC allowed
• If supplied for outward supply (catering company's purchases — ITC allowed)

Employee benefits and gifts (17(5)(g), (h))

ITC BLOCKED on:

• Gifts and free samples (above ₹50,000 per employee per year as per income tax norms, or business gifts)
• Employee welfare expenses not statutory mandated
• Goods/services for personal use of employees (even if company-paid)
• Lost, stolen, destroyed, written-off goods

However, employer's contribution to PF, ESI (employer's part) is not GSTable.

Construction of immovable property (17(5)(c), (d))

ITC BLOCKED on:

• Construction of immovable property (including reconstruction, renovation, extension) — for own use
• Works contract services for construction of immovable property
• Building materials (cement, steel, sand) for own construction

Exception: If construction is for further supply (real estate developers selling units — ITC allowed up to certain limits; plant and machinery (P&M, except buildings) — ITC allowed

Other blocked categories

• 17(5)(e) — Goods/services for personal consumption by directors/employees
• 17(5)(f) — Travel benefits to employees on vacation (LTC, holiday packages)
• 17(5)(g) — Goods used for self-supply (consumption)
• 17(5)(h) — Goods lost, stolen, destroyed, written off, or disposed by gift/free sample
• 17(5)(i) — Tax paid under Section 74 (fraud), 129 (detention), 130 (confiscation)