Taxation · Input Tax Credit

Blocked Credits under Section 17(5) of the CGST Act

Updated 4 October 2026 · Fact-checked

Blocked credit means input tax credit that Section 17(5) of the CGST Act, 2017 does not allow, even if you hold a valid invoice and use the input in business. Examples include cars, food and beverages, club memberships and construction of own immovable property. To solve, match the item to the clause, then check the exception.

Understand Blocked Credits (Section 17(5))

Normally, you get ITC on inputs, input services and capital goods used in the course or furtherance of business, if the Section 16 conditions are met. Section 17(5) starts with the words "notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 17". So these items are denied even when Section 16 is fully satisfied. The tax paid on them becomes a cost.

Why block them? Many of these items mix business use with personal use, or are hard to trace (food, club membership, cars). Others, like construction of a building, create an immovable asset that is not meant to be sold with tax charged.

The main blocked items are:

Motor vehicles for carrying persons, with seating capacity of not more than 13 (including the driver). Vessels and aircraft are blocked separately, and the 13-seat limit does not apply to them. Insurance, servicing, repair and maintenance of these blocked vehicles, vessels and aircraft are also blocked.
Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery.
Membership of a club, health and fitness centre.
Renting or hiring of motor vehicles (rent-a-cab), life insurance and health insurance.
Travel benefits for employees on vacation, such as leave or home travel concession.
Works contract services for construction of immovable property (other than plant and machinery), and goods or services for construction of immovable property on own account (other than plant and machinery). The own-account block applies even when the property is used in the course or furtherance of business.
Goods or services on which composition tax is paid, goods or services received by a non-resident taxable person (except on goods imported by him), goods or services for personal consumption, goods lost, stolen, destroyed, written off or given as gifts or free samples, and any tax paid under sections 74, 129 and 130 (tax demanded in fraud or wilful misstatement cases, and tax paid on detention or confiscation of goods or conveyances). Only this last item, tax paid under sections 74, 129 and 130, is clause (i) of Section 17(5). The other items in this bullet sit in separate clauses of Section 17(5).

Every block has exceptions. Exams test the exceptions more than the list. Each group has its own exception, so do not mix them:

Motor vehicles are allowed if used for further supply of such vehicles, transportation of passengers, or imparting driving training.
Vessels and aircraft are allowed if used for further supply of such vessels or aircraft, transportation of passengers, imparting training on navigation or flying, or transportation of goods.
Insurance, servicing, repair and maintenance of blocked vehicles, vessels and aircraft are allowed when the vehicle, vessel or aircraft itself is eligible under its exception. They are also allowed when received by a person who manufactures such vehicles, vessels or aircraft, or who supplies general insurance services for insuring such vehicles, vessels or aircraft.
Food, beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery are allowed when the inward supply of a particular category is used to make an outward taxable supply of the same category, or as an element of a taxable composite or mixed supply.
Club, health and fitness centre membership and employee vacation travel benefits have no exception in the clause. They are blocked.
Rent-a-cab, life insurance and health insurance are allowed where the Government notifies the service as obligatory for an employer to provide to employees under any law, or where the same category of service is used for an outward supply of that category.

For immovable property, plant and machinery is not blocked. It means apparatus, equipment and machinery fixed to earth by foundation or structural support and used for making outward supply. It includes that foundation and structural support. It excludes land, buildings and other civil structures, telecommunication towers, and pipelines laid outside the factory premises. "Construction" includes re-construction, renovation, additions, alterations or repairs, to the extent they are capitalised.

Key rules to remember

Motor vehicle block: Blocked if: vehicle carries persons AND seating capacity ≤ 13 (including driver); Allowed if used for further supply of such vehicles, transport of passengers, or driving training. A vehicle with seating above 13 is not covered by this block.
Vessels and aircraft block: Blocked unless used for: further supply of such vessels or aircraft, passenger transport, training on navigation or flying, or transportation of goods; The 13-seat limit applies only to motor vehicles, not to vessels and aircraft. Insurance, servicing, repair and maintenance of blocked vehicles, vessels and aircraft are blocked too. They are allowed if the vehicle, vessel or aircraft itself is eligible, or if the recipient manufactures such vehicles, vessels or aircraft, or supplies general insurance services for insuring them.
Food, catering, beauty, health services and cosmetic surgery: Blocked unless: same category used for outward taxable supply of the same category, or as an element of a taxable composite or mixed supply; Example: a caterer buying food for supplying outdoor catering gets ITC. A manufacturer buying catering for a staff party does not.
Rent-a-cab, life insurance and health insurance: Blocked unless: notified as obligatory for an employer by law, or same category used for outward supply of that category; Example: health insurance a manufacturer buys for staff, with no law making it obligatory, is blocked. A cab operator that hires cabs to supply rent-a-cab service outward is the same-category case, so ITC is allowed.
Club, fitness centre and employee vacation travel: Membership of club / health and fitness centre = blocked; leave or home travel concession = blocked; These are blocked as listed. Do not apply the same-category exception to them.
Works contract and own-account construction: Blocked: works contract / goods / services for construction of immovable property (other than plant and machinery); Works contract is allowed when it is an input service for further supply of works contract service. Own-account construction is blocked even when the property is used in the course or furtherance of business. Plant and machinery (with its foundation and structural support) is not blocked.
Other blocked credits: Composition tax paid; non-resident taxable person (except imported goods); personal consumption; lost, stolen, destroyed, written off, gifts, free samples; any tax paid under sections 74, 129 and 130; Learn these as a checklist. Only tax paid under sections 74, 129 and 130 is clause (i); the other items are in separate clauses. Questions often hide one of them in a long fact pattern.

How to solve Blocked Credits (Section 17(5)) questions

Use the same sequence for any question on whether ITC is allowed. It stops you from blocking items that are actually allowed.

1List each purchase separately with its GST amount. Do not treat the question as one lump.
2Confirm the basic Section 16 conditions are assumed met (invoice, receipt, tax paid, return filed) unless the question says otherwise.
3Match each item to a clause of Section 17(5): vehicles, vessels and aircraft, food and similar services, club and travel, works contract or construction, or the other blocked items.
4Check the exact condition of the block, such as seating capacity of 13 or less, or immovable property other than plant and machinery.
5Check the exceptions: nature of the buyer's business, use of the item, and whether it is the same category of supply.
6Decide each item as eligible or blocked, and write the clause reason in a few words.
7Add up eligible ITC and blocked ITC separately and state both. Check that the two totals add up to the total GST paid.
8If the question asks for accounting treatment, say that blocked tax is added to the cost of the item or expensed.

Quickest way: Block, then Exception, then Amount

When to use it: Use this for MCQs and for the first line of every written answer on ITC eligibility.

Ask: is the item on the blocked list? If no, it is eligible (given Section 16 is met). Stop.
If yes, ask: is the buyer in the exception business? Car dealer, taxi operator, driving school, caterer, works contractor passing on a works contract.
In MCQs, look for the trap words: seating capacity, own account, same category, plant and machinery, obligatory by law.
In written answers, use this format: Item, Clause of Section 17(5), Exception tested, Conclusion with amount. This gets step marks even if the final total is wrong.
Total eligible ITC and blocked ITC at the end, and write one line stating the answer.

Common mistakes in Blocked Credits (Section 17(5))

Blocking every motor vehicle.
Students remember 'cars are blocked' and stop there.
Fix: Check seating capacity (13 or less including driver) and use. Buses above 13 seats, and vehicles used for goods transport, are not covered by the person-carrying block. Dealers, cab operators and driving schools get the exception.
Blocking plant and machinery along with a building.
Students read 'construction of immovable property' and ignore the bracket.
Fix: Plant and machinery is excluded from the block, including its foundation and structural supports. Buildings and civil structures are not plant and machinery.
Allowing ITC on works contract for the buyer's own factory building.
Students think works contract is always a taxable input for business.
Fix: Works contract for construction of immovable property (other than plant and machinery) is blocked. It is allowed only when used as an input service for further supply of works contract service. Own-account construction is blocked even if the property is used in business.
Missing the same-category exception on food, catering and similar services.
Students learn the list but not the condition.
Fix: Ask whether the buyer supplies the same category outward, or uses the input as an element of a taxable composite or mixed supply. A caterer, a beauty parlour or a health service provider can claim ITC on the same category of input.
Blocking life insurance, health insurance or rent-a-cab even when the law makes it obligatory for the employer.
Students recall only the block, not the exception for employer obligations.
Fix: Check whether the Government has notified the service as obligatory for an employer to provide to employees under any law, or whether the same category is used for outward supply. Do not apply this exception to food, club membership or vacation travel.
Forgetting that insurance, repair and maintenance of a blocked vehicle, vessel or aircraft are also blocked.
Students treat the vehicle and its running costs as separate issues.
Fix: Apply the block to insurance, servicing, repair and maintenance too. They are allowed only if the vehicle, vessel or aircraft is itself eligible, or the recipient makes such vehicles, vessels or aircraft, or supplies general insurance services for insuring them.

Worked examples

Example 1

Sharma Industries Ltd, a manufacturer of taxable goods, made these purchases in a month. All Section 16 conditions are met. GST paid: (a) a 5-seater car for directors, ₹2,80,000; (b) a 30-seater bus for staff transport, ₹1,50,000; (c) outdoor catering for a staff party, ₹18,000; (d) works contract services for construction of its own factory building, capitalised, ₹4,50,000; (e) foundation and structural support for a machine fixed to earth, used in manufacture, ₹60,000; (f) club membership for the managing director, ₹9,000; (g) raw materials, ₹1,20,000. Find eligible ITC and blocked credit.

Show the solution

(a) Car: carries persons, seating 5 (13 or less). The company does not deal in cars, transport passengers or give driving training. Blocked: ₹2,80,000.
(b) Bus: seating 30 is above 13, so the motor vehicle block does not apply. Eligible: ₹1,50,000.
(c) Outdoor catering: blocked, as the company does not supply catering outward and it is not part of a taxable composite or mixed supply. Blocked: ₹18,000.
(d) Works contract for own factory building: construction of immovable property other than plant and machinery, not for further supply of works contract. It is blocked even though the building is used in business. Blocked: ₹4,50,000.
(e) Foundation and structural support for machinery: forms part of plant and machinery. Eligible: ₹60,000.
(f) Club membership: blocked. ₹9,000.
(g) Raw materials: not on the blocked list. Eligible: ₹1,20,000.
Eligible ITC = 1,50,000 + 60,000 + 1,20,000 = ₹3,30,000.
Blocked ITC = 2,80,000 + 18,000 + 4,50,000 + 9,000 = ₹7,57,000.
Check: 3,30,000 + 7,57,000 = ₹10,87,000, which equals the total GST paid (2,80,000 + 1,50,000 + 18,000 + 4,50,000 + 60,000 + 9,000 + 1,20,000 = ₹10,87,000).

Answer: Eligible ITC is ₹3,30,000 (bus, machinery foundation, raw materials). Blocked credit is ₹7,57,000 (car, catering, works contract for own building, club membership).

Example 2

State with reasons whether ITC is available under Section 17(5) in each case. All other conditions are met. (i) A car dealer buys 5-seater cars for resale; GST ₹2,00,000. (ii) A cab service provider buys 5-seater cars to run taxis; GST ₹1,40,000. (iii) A contractor receives a sub-contract works contract service to supply works contract service to a client; GST ₹90,000. (iv) A caterer buys food items and catering services to supply outdoor catering; GST ₹30,000. (v) A manufacturer buys health insurance for employees, not obligatory under any law; GST ₹12,000.

Show the solution

(i) Cars carrying persons with seating of 13 or less are blocked, but an exception applies for further supply of such vehicles. Eligible: ₹2,00,000.
(ii) The exception for transportation of passengers applies. Eligible: ₹1,40,000.
(iii) Works contract is blocked for construction of immovable property, but it is allowed when it is an input service for further supply of works contract service. Eligible: ₹90,000.
(iv) Food and outdoor catering are blocked, but allowed when used for outward taxable supply of the same category. Eligible: ₹30,000.
(v) Health insurance is blocked. The manufacturer does not supply insurance and the service is not notified as obligatory by law. Blocked: ₹12,000.
Eligible total = 2,00,000 + 1,40,000 + 90,000 + 30,000 = ₹4,60,000. Blocked = ₹12,000.

Answer: ITC is available in cases (i) to (iv), totalling ₹4,60,000. In case (v), ₹12,000 is blocked under Section 17(5).

Exam tips

Write the clause logic for every item in a few words, such as 'car, seats 5, not dealer, blocked'. Step marks follow the reasoning.
In MCQs, read the buyer's business first. The same car or catering can be blocked for one person and eligible for another.
Always test the bracket words: 'other than plant and machinery', 'seating capacity not more than 13', 'same category', 'on own account'.
Do not give ITC on any blocked item just because it is capitalised or used for business. The block overrides Section 16.
In long questions, total eligible and blocked ITC separately and check they sum to the total GST paid.

Practice questions from Input Tax Credit

Blocked Credits (Section 17(5)) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Blocked Credits (Section 17(5)): frequently asked questions

What is blocked credit under Section 17(5) of the CGST Act?

It is input tax credit that the law denies even if you have a valid invoice and use the item in business. The list covers items like motor vehicles, food and beverages, club memberships, and construction of immovable property. Each item has its own conditions and exceptions.

When is ITC allowed on motor vehicles?

The block applies to vehicles for carrying persons with seating capacity of not more than 13 including the driver. ITC is allowed if the vehicle is used for further supply of such vehicles, transportation of passengers, or imparting driving training. A vehicle with seating above 13 is not covered by this block.

Is ITC available on construction of immovable property?

Not on works contract services or goods and services used for construction of immovable property on own account, other than plant and machinery. The own-account block applies even if the property is used in your business. A works contract service used as an input for further supply of works contract service is allowed. Plant and machinery, with its foundation and structural supports, is not blocked.

Can I claim ITC on food and beverages given to employees?

Generally no, because food, beverages and outdoor catering are blocked. ITC is allowed if you use the same category of input to make an outward taxable supply of that category, or as an element of a taxable composite or mixed supply. The exception for services notified as obligatory for an employer applies to rent-a-cab, life insurance and health insurance, not to food.