Blocked Credits under GST
Section 17(5) is the negative list of GST credits: motor vehicles, food and beverages, club memberships, works contracts for immovable property, personal-consumption goods and more — credits denied even when the business-use test of section 16 is met.
The provision, in plain terms
Notwithstanding section 16, ITC is not available for: motor vehicles for transport of persons (seating ≤ 13) except when used for further supply, passenger transport or driver training; vessels and aircraft with similar exceptions; services of insurance, servicing and repair of such vehicles; food and beverages, outdoor catering, beauty treatment, health services, cosmetic surgery (except where used to make an outward supply of the same category or where statutorily obligatory for employers); club and fitness memberships; travel benefits to employees on vacation; works contract services for construction of immovable property (other than plant and machinery) except as input for further works contract supply; goods/services for construction on own account; composition-scheme inward supplies; personal consumption; goods lost, stolen, destroyed, written off or disposed as gifts or free samples; and tax paid under fraud-related demand provisions.
Points worth memorising
- Motor vehicles (≤13 seats) blocked unless used for resale, passenger transport or driving schools; goods-transport vehicles are never blocked.
- Food, catering, beauty, health and cosmetic services blocked — except same-category outward supply or where a law obliges the employer to provide them.
- Works contract and own-account construction of immovable property blocked, except for plant and machinery.
- Gifts and free samples: credit blocked on goods disposed of by way of gift — the CSR/promo-goods debate flows from here.
- Statutory-obligation exception (post-2019) is the examiners' favourite twist: canteen under Factories Act, etc.
How the exam tests it
Every GST paper at Intermediate and Final carries at least one 17(5) question — usually a list of expenses asking which credits are blocked. The motor-vehicle exceptions and employer-obligation carve-out are the standard traps.
Tested at: intermediate · final
Related sections
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Talk to usCan a company claim ITC on cars bought for employees?
No — motor vehicles for transport of persons with seating capacity up to 13 are blocked unless the business is supplying such vehicles, transporting passengers, or imparting driving training. Employee-use cars fail all three exceptions.
Is ITC available on canteen services for employees?
Only where providing the canteen is obligatory under a law (e.g., Factories Act for units above the headcount threshold) — the statutory-obligation proviso added in 2019 permits that credit; voluntary canteens remain blocked.