Blocked Credits Under Section 17(5) of GST: Full List

Blocked credits under section 17(5) of the CGST Act are the input tax credits you cannot claim even though you paid GST on a business purchase and the invoice appears in your GSTR-2B. The list covers items the law treats as personal in nature, prone to misuse or tied to immovable property. Getting this wrong is one of the most common reasons for GST audit objections, because blocked credit claimed and used attracts reversal with interest. This guide goes through each category, the exceptions that make credit available again, a worked example of a typical month's expenses and how to report blocked credit correctly.

How blocked credits fit into the ITC rules

Input tax credit is available under section 16 when four conditions are met: you hold a valid tax invoice, the goods or services are received, the supplier has paid the tax and you have filed your return. Section 17 then limits credit in two ways. Sections 17(1) to 17(4) require apportionment where purchases are used partly for exempt or non-business purposes. Section 17(5) is an absolute block: for the listed items, credit is not available at all, regardless of business use, unless a specific exception applies.

Category 1: motor vehicles and conveyances

Credit is blocked on motor vehicles for transportation of persons having an approved seating capacity of not more than 13 persons, including the driver. Credit is allowed when such vehicles are used for:

• Making a further supply of such vehicles (a car dealer).
• Transportation of passengers (a cab operator or tour company).
• Imparting training on driving such vehicles (a driving school).

Credit is not blocked on motor vehicles used for transporting goods, such as trucks and delivery vans, or on vehicles with seating capacity above 13, such as staff buses. Similar rules apply to vessels and aircraft. Credit on general insurance, servicing, repair and maintenance of blocked vehicles is also blocked, except where the vehicle itself qualifies for an exception, or where the services are received by a manufacturer of such vehicles or by an insurer.

Leasing and renting of vehicles

Leasing, renting or hiring of the blocked motor vehicles, vessels and aircraft is also blocked, subject to the same exceptions and to the employer obligation exception discussed below.

Category 2: food, beauty, health and insurance

Section 17(5)(b)(i) blocks credit on:

• Food and beverages, outdoor catering.
• Beauty treatment, health services, cosmetic and plastic surgery.
• Life insurance and health insurance.

Exception for same-line businesses: credit is available where these inward supplies are used to make an outward taxable supply of the same category, or as an element of a taxable composite or mixed supply. An event company buying outdoor catering for a client event it bills can claim the credit.

Exception for statutory obligations: credit on these items is available where it is obligatory for an employer to provide them to employees under any law in force. For example, a factory required by law to run a canteen can claim credit on canteen services, to the extent the employer bears the cost. A company that provides free lunch as a perk, with no legal obligation, cannot.

Category 3: clubs, fitness and employee travel

• Membership of a club, health and fitness centre: blocked.
• Travel benefits extended to employees on vacation, such as leave or home travel concession: blocked.

Business travel by employees is not in this category. Air tickets and hotel stays for business trips are generally eligible, subject to place of supply rules for hotels in other states.

Category 4: construction of immovable property

This is the category with the largest rupee impact for growing businesses.

• Works contract services supplied for construction of immovable property (other than plant and machinery) are blocked, except where they are an input service for a further supply of works contract service.
• Goods or services received for construction of immovable property on your own account (other than plant and machinery) are blocked, even when the building is used for business.

"Construction" includes reconstruction, renovation, additions, alterations and repairs to the extent of capitalisation. Repairs charged to profit and loss are not blocked by this clause. "Plant and machinery" means apparatus, equipment and machinery fixed to earth by foundation or structural support and used for making outward supplies, including such foundation and support, but excludes land, buildings and other civil structures. After a 2024 Supreme Court decision on this issue, the Finance Act 2025 amended the wording retrospectively to "plant and machinery", so credit on a building rented out commercially remains blocked. Take advice if you have significant construction spends.

Category 5: other blocked items

• Goods or services on which tax has been paid under the composition scheme.
• Goods or services received by a non-resident taxable person, except imported goods.
• Goods or services used for activities relating to Corporate Social Responsibility obligations under the Companies Act.
• Goods or services used for personal consumption.
• Goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.
• Tax paid under demand orders in cases involving fraud or suppression, and tax paid on detention or confiscation of goods in transit.

The gifts and free samples rule is often missed. If you buy diaries for ₹2,00,000 plus 18% GST to give away to customers at Diwali, the ₹36,000 credit is blocked. If goods from your trading stock are given as free samples, credit already taken on them must be reversed.

Worked example: a month of expenses

A Hyderabad software services company records these GST-paid expenses in a month:

Expense	GST paid	Eligible?	Reason
Laptops for staff	₹54,000	Yes	Capital goods used for business
Office rent	₹36,000	Yes	Input service for business
Team lunch at a restaurant	₹2,500	No	Food and beverages, no legal obligation
Car purchased for director (5 seats)	₹1,80,000	No	Motor vehicle for persons, 13 seats or fewer
Insurance and servicing of that car	₹9,000	No	Linked to a blocked vehicle
Staff bus hire (35 seats) for office commute	₹12,000	Yes	Vehicle seating more than 13
Gym membership for employees	₹6,000	No	Health and fitness centre membership
Office interior renovation, capitalised	₹72,000	No	Construction of immovable property on own account
Customer gift hampers	₹9,000	No	Goods disposed of as gifts
Business air travel	₹4,500	Yes	Business travel, not leave travel

Total GST paid: ₹54,000 + ₹36,000 + ₹2,500 + ₹1,80,000 + ₹9,000 + ₹12,000 + ₹6,000 + ₹72,000 + ₹9,000 + ₹4,500 = ₹3,85,000. Eligible credit: ₹54,000 + ₹36,000 + ₹12,000 + ₹4,500 = ₹1,06,500. Blocked credit: ₹2,78,500. The blocked amount becomes part of the cost of the respective asset or expense in the books.

How to report blocked credit in GSTR-3B

All eligible-looking invoices appear in GSTR-2B and auto-populate Table 4A of GSTR-3B. For blocked credits:

1. Keep the auto-populated Table 4A figure as it is.
2. Report blocked credit as a reversal in Table 4B(1), which covers reversals under rules 38, 42, 43 and section 17(5).
3. Net ITC in Table 4C then reflects only eligible credit.

Some advisories also allow certain ineligible credit to be shown in Table 4D. Follow the current GSTR-3B instructions on the portal. In IMS, a genuine invoice for a blocked item should still be accepted; see our IMS guide on why acceptance and eligibility are separate decisions.

Common mistakes

• Claiming credit on cars because they are "used for business".
• Claiming credit on capitalised office fit-outs and civil work.
• Claiming credit on employee welfare items like food, gym and health insurance without a legal obligation.
• Not reversing credit on goods given as free samples or written off after a stock count.
• Treating CSR spends as ordinary business expenses for credit.
• Forgetting that credit on repair of a blocked vehicle is also blocked.

A quick ITC eligibility checklist for each bill

1. Is the invoice in GSTR-2B and accepted in IMS?
2. Have the goods or services been received?
3. Is it used for business and for taxable supplies?
4. Does it fall in any section 17(5) category?
5. If yes, does an exception apply (same-line supply, statutory obligation, goods transport, more than 13 seats)?
6. Will you pay the supplier within 180 days?

For the full matching process, see our GSTR-2B reconciliation guide.

How Fininvo helps

Fininvo ERP lets you define tax groups, exemptions and reverse charge rules in a tax rate master and maintains an ITC ledger showing credits available, utilised and lapsed, so blocked expense categories can be kept out of claimable credit. See tax compliance, accounting and pricing.

General information, not tax advice. Blocked credit issues are often fact-specific; consult your CA.

Frequently Asked Questions

Can a company claim ITC on a car used by its sales team?

Not if the car seats 13 or fewer persons and the company is not in the business of selling cars, transporting passengers or driving training. Business use alone does not make the credit available.

Is ITC on a goods carriage blocked?

No. Motor vehicles used for transporting goods are outside the block, so credit on a delivery van, truck or tempo is available if other conditions are met.

Can I claim ITC on canteen expenses?

Only where providing the canteen is obligatory for the employer under a law in force, such as factories legislation for larger establishments, and then only to the extent of the cost borne by the employer.

Is ITC on office repairs blocked?

Repairs charged to the profit and loss account are not blocked by the construction clause. Renovation or additions that are capitalised to the building are blocked.

Do I need to reverse ITC on goods destroyed in a fire?

Yes. Credit on goods lost, stolen, destroyed or written off must be reversed. Insurance claims do not change this.