Indirect Tax Laws and Practice · Input Tax Credit

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

Updated 11 October 2026 · Fact-checked

Blocked credit is input tax credit that Section 17(5) of the CGST Act denies even when you are registered, hold an invoice and use the item in business. The list covers motor vehicles, vessels and aircraft, food, club memberships, works contract for immovable property and more. To solve a question, find the item, then check its exception.

Understand Blocked Credits under Section 17(5)

Normally you can claim credit on inputs used in business. Section 17(5) is an override. It begins "Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18", so credit is denied even if the Section 16 conditions are met.

Think of the section as a list of items, each with a few exceptions. The exception usually says: the item is used to make the same kind of outward supply, or it is the core of your business. Blocked credit is not the same as apportionment under Section 17(1) and 17(2). Apportionment restricts credit for non-business or exempt use. Blocking applies to named items whatever you do with them, unless an exception fits.

The main blocks are: small motor vehicles (seating capacity of not more than thirteen persons including the driver); vessels and aircraft; their insurance, servicing, repair and maintenance; food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, life and health insurance, and hiring of such vehicles, vessels or aircraft; club and fitness memberships; employee vacation travel benefits; works contract and construction of immovable property; tax paid under composition (section 10); goods received by a non-resident taxable person; CSR goods and services; personal consumption; and goods lost, stolen, destroyed, written off or given as gifts or free samples.

Plant and machinery is the key carve-out for construction. It means apparatus, equipment and machinery fixed to earth by foundation or structural support, used for making outward supplies, including that foundation and 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 of capitalisation.

Key rules to remember

Motor vehicles (clause a): Blocked if seating capacity ≤ 13 persons (including driver), for transporting persons; Allowed if used for further supply of such vehicles, transportation of passengers, or training on driving such vehicles.
Vessels and aircraft (clause aa): Blocked unless used for further supply, passenger transport, training on navigating or flying, or transport of goods; Goods transport is an exception for vessels and aircraft, not for small motor vehicles.
Insurance, servicing, repair (clause ab): Blocked only to the extent they relate to vehicles, vessels or aircraft whose credit is blocked; Allowed where the vehicle is used for the permitted purposes, or the recipient manufactures such vehicles or supplies insurance on vehicles it insures.
Food, beauty, health, insurance etc. (clause b(i)): Blocked unless 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 to supply catering can claim credit.
Club and travel benefits (clause b(ii), b(iii)): Club or fitness membership: blocked. Employee vacation travel such as LTC: blocked; Allowed where the employer is obliged to provide it under any law in force.
Construction (clauses c and d): Works contract or goods and services for construction of immovable property other than plant and machinery: blocked; Works contract credit is allowed if it is an input service for further supply of works contract service. Clause (d) applies on own account, even in business use.
Other blocks: Section 10 tax paid; non-resident taxable person (except imported goods); CSR; personal use; lost, stolen, destroyed, written-off, gifts, free samples; tax under section 74 for periods up to FY 2023-24; These have no general business-use exception.

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

Use the same sequence for every Section 17(5) question.

1List each purchase in the question separately with its amount of GST.
2Match each purchase to a clause of Section 17(5). If none matches, credit is not blocked here; then check Section 16 conditions and apportionment.
3For vehicles, note the seating capacity and the purpose of use. For vessels and aircraft, note goods or passenger use.
4For food, health, insurance and similar services, check whether the outward supply is of the same category.
5For construction, ask whether the asset is plant and machinery, or a building or civil structure.
6Test the exception for each matched item. State whether the exception is met.
7Add up the allowed credit and the blocked credit. The blocked tax goes to cost.
8Write the conclusion with the clause number or the rule in words.

Quickest way: Block, then exception, then total

When to use it: Use this in MCQs and in numerical questions listing several purchases.

Tag each item as Blocked, Exception or Not in list.
Check the exception trigger words: same category, further supply, passenger transport, goods transport, legal obligation, plant and machinery.
Total only the credit on items tagged Exception or Not in list.
Check Section 17(2) apportionment last if exempt supplies also exist.

Common mistakes in Blocked Credits under Section 17(5)

Blocking a vehicle seating more than thirteen persons.
Students remember vehicles as blocked without the seating test.
Fix: Clause (a) covers only vehicles for transporting persons with seating capacity of not more than thirteen including the driver.
Allowing credit on a small car used for goods transport.
The goods transport exception belongs to vessels and aircraft and is wrongly applied to motor vehicles.
Fix: For small motor vehicles, the exceptions are further supply, passenger transport and driving training only.
Blocking food bought by a restaurant or caterer.
Students ignore the proviso to clause (b)(i).
Fix: Credit is allowed when the inward supply is used for an outward taxable supply of the same category or as an element of a taxable composite or mixed supply.
Blocking credit on machinery foundation and structural supports.
These look like construction.
Fix: Plant and machinery includes the foundation and structural supports. Only land, buildings, civil structures, telecom towers and pipelines outside the factory are excluded.
Allowing credit on construction because the building is used in business.
Students apply a business-use test.
Fix: Clause (d) blocks construction on own account including in the course or furtherance of business. Only plant and machinery is excepted.
Confusing blocked credit with apportionment.
Both reduce credit.
Fix: Blocked credit is item-based under 17(5). Apportionment under 17(1) and 17(2) depends on non-business or exempt use.

Worked examples

Example 1

A manufacturer registered under GST bought in a month: (a) a car with seating capacity of 5 for director use, GST ₹2,40,000; (b) a van with seating capacity of 20 for staff transport, GST ₹1,80,000; (c) machinery fixed to a concrete foundation, GST ₹3,00,000 including GST on the foundation; (d) cement and steel for building a new office, GST ₹1,20,000. All are for business and used for taxable supplies. Compute eligible ITC.

Show the solution

Car: seating capacity 5 is not more than thirteen and it is not used for further supply, passenger transport or driving training. Blocked. ₹0.
Van: capacity 20 exceeds thirteen, so clause (a) does not apply. Allowed, subject to other conditions. ₹1,80,000.
Machinery with foundation: plant and machinery includes foundation and structural supports. Allowed. ₹3,00,000.
Cement and steel for office building: construction of immovable property other than plant and machinery, own account. Blocked under clause (d). ₹0.
Total eligible: 1,80,000 + 3,00,000 = ₹4,80,000. Blocked: 2,40,000 + 1,20,000 = ₹3,60,000.

Answer: Eligible ITC is ₹4,80,000. ITC of ₹3,60,000 is blocked and goes into the cost of the assets.

Example 2

Delight Caterers Pvt Ltd, a registered person making taxable outdoor catering supplies, incurred: (a) GST ₹50,000 on food ingredients used for the catering; (b) GST ₹30,000 on a corporate club membership for its directors; (c) GST ₹20,000 on health insurance for employees, which no law requires it to provide. Determine eligible ITC.

Show the solution

Food and beverages and outdoor catering are blocked under clause (b)(i), but the proviso allows credit where the inward supply is used for an outward taxable supply of the same category. The company supplies catering, so (a) is allowed: ₹50,000.
Club membership is blocked under clause (b)(ii). The legal obligation proviso does not apply, so ₹0.
Health insurance is blocked in clause (b)(i). The company does not supply health insurance, so the same-category proviso fails. The employee-benefit proviso mentioned in the Act concerns clause (b)(iii), not insurance, so ₹0.
Total eligible: ₹50,000.

Answer: Eligible ITC is ₹50,000. The ₹30,000 on club membership and ₹20,000 on health insurance are blocked.

Exam tips

Write the clause or the rule in plain words next to each blocked item. Examiners give marks for the reason.
Always state the exception for each blocked item, even in a short answer.
In a case scenario, watch for words like capital, own account, plant and machinery, and seating capacity.
Do not stop at Section 17(5). Mention apportionment where exempt supplies also appear in the facts.
In MCQs, look for the trap: a vehicle with more than thirteen seats, or food bought by a caterer.

Practice questions from Input Tax Credit

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

Is ITC on motor vehicles allowed under GST?

For vehicles carrying persons with seating capacity of not more than thirteen including the driver, credit is blocked. It is allowed if you use them for further supply of such vehicles, transporting passengers or training on driving them. Vehicles seating more than thirteen are not caught by this clause.

Is ITC allowed on works contract for construction?

Not when the works contract is for construction of an immovable property other than plant and machinery. It is allowed where the works contract service is an input service for further supply of works contract service.

Is credit blocked on construction of a factory building?

Yes. Goods or services received for construction of an immovable property other than plant and machinery on your own account are blocked, even if used in business. Credit on plant and machinery, including its foundation and structural supports, is allowed.

Is credit on CSR spending blocked?

Yes. Goods or services used or intended to be used for CSR activities under section 135 of the Companies Act, 2013 are blocked under clause (fa).