CORAA University · GST tool

Blocked Credit Checker Section 17(5)

Pick the expense, answer the exception questions, and get a blocked / allowed / conditional verdict with the exact clause, every exception condition, the employer-obligation proviso, and the plant-and-machinery definition. Current through Finance Act 2025 (retrospective 'plant and machinery' in clause (d)) and Finance (No. 2) Act 2024 (clause (i)).

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What is the expense?

Section 17(5) clause list

Why this matters in audit

Blocked credits surface clause by clause.

CORAA's AI working papers test the ITC register against the Section 17(5) list — flagging vehicle, catering, construction and CSR credits with the clause and the exception that could save them, before GSTR-9 Table 7 is due.

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How Section 17(5) blocks (and unblocks) input tax credit

Section 16 grants ITC on anything used in the course or furtherance of business — and Section 17(5) then carves out a specific negative list "notwithstanding" that grant. The list runs from motor vehicles for transporting persons (≤13 seats, clause (a)), vessels and aircraft (aa) and their insurance/repair (ab), through employee-facing spends — food and catering, vehicle hire, insurance, club membership, vacation travel (clause (b)) — to works contracts and own-account construction of immovable property ((c) and (d)), composition inward supplies (e), non-resident procurement (f), CSR expenditure (fa), personal consumption (g), goods lost/stolen/destroyed/written-off/gifted (h), and tax paid on fraud demands (i).

Nearly every clause carries exceptions that reverse the outcome: passenger vehicles become creditable for dealers, cab operators and driving schools; catering becomes creditable when re-supplied or when a law obliges the employer to provide it; works contract and construction credits survive when the asset is "plant and machinery" — apparatus fixed to earth by foundation, including the foundation itself, but never land, buildings, civil structures, telecom towers or external pipelines. The single most-missed unblock is the proviso to clause (b): ITC is available wherever providing the benefit is OBLIGATORY for the employer under any law in force — and Circular 172/04/2022-GST confirms it covers the whole of clause (b).

The section has moved twice recently. Finance Act 2023 inserted clause (fa) blocking CSR-linked credit from 1 October 2023 (prospectively). Finance (No. 2) Act 2024 rewrote clause (i) from 1 November 2024 — it now blocks only tax paid under Section 74 for periods up to FY 2023-24, and the old references to Sections 129 and 130 are gone. And after the Supreme Court’s Safari Retreats ruling (October 2024) let a mall developer argue a building could be a "plant", Finance Act 2025 retrospectively substituted "plant and machinery" in clause (d) from 1 July 2017 — legislatively closing that door.

Worked example — factory canteen catering

A manufacturing company with 400 workers engages an outdoor caterer for its factory canteen at ₹2,00,000 + 18% GST per month. Employees are charged a nominal ₹10 per meal. Is the ₹36,000 monthly ITC available?

Inputs

ExpenseOutdoor catering — s.17(5)(b)(i)

Same-category outward supply?No (manufacturer, not caterer)

Obligatory under law?Yes — s.46 Factories Act mandates a canteen for 250+ workers

Recovery from employees₹10/meal (nominal)

Output

VerdictITC allowed — employer-obligation proviso to s.17(5)(b)

ExtentCredit restricted to the cost borne by the employer

DocumentationWorker-count evidence + Factories Act mandate on file

Outdoor catering is squarely blocked by clause (b)(i) — but the proviso restores the credit because s.46 of the Factories Act makes the canteen obligatory for this employer. Circular 172/04/2022-GST confirms the proviso applies across clause (b). The same invoice in a 100-person software office (no statutory canteen mandate) would be fully blocked. Where employees are charged, the recovered portion is a separate supply-and-valuation question; the safe position is claiming ITC only to the extent of cost the employer bears.

Common mistakes

Writing off employee-welfare ITC without checking the statutory mandate

The proviso to s.17(5)(b) unblocks catering, transport, insurance and even club/fitness spend wherever a LAW obliges the employer to provide it — Factories Act canteens (250+ workers), night-shift transport for women employees under state Shops & Establishments Acts, statutorily mandated insurance. Circular 172/04/2022-GST confirms the proviso covers the whole of clause (b). Reversing these credits by default leaves real money on the table.

Claiming construction ITC on the strength of Safari Retreats

The Supreme Court (Oct 2024) allowed a functionality test for "plant or machinery" in clause (d) — but Finance Act 2025 substituted "plant and machinery" RETROSPECTIVELY from 1 July 2017, expressly overriding contrary judgments. Credits claimed for buildings (malls, warehouses, leased offices) on the Safari Retreats reading now stand on amended text and need re-evaluation, disclosure, or reversal.

Blocking ITC on repairs because the building is immovable

Clauses (c)/(d) reach re-construction, renovation, additions and repairs only TO THE EXTENT CAPITALISED. Repairs and renovation charged to P&L stay creditable. The fixed-asset register — not the nature of the work — decides the GST position, so align capitalisation policy and ITC claims.

Missing that CSR credit died only from 1 October 2023

Clause (fa) — Finance Act 2023 — blocks ITC on s.135 CSR spend prospectively from 01-10-2023. Blanket reversals for earlier periods concede more than the law requires; blanket claims after that date are indefensible. Split the CSR ledger at the effective date.

Reversing ITC on warranty replacements and trade schemes as "free samples"

Clause (h) hits gifts and free samples — but Circular 195/07/2023-GST confirms warranty replacements need no reversal (the original price covered them), and Circular 92/11/2019 treats buy-one-get-one as a priced composite supply, not a gift. Only genuinely free disposals — promotional samples, Diwali gifts, destroyed stock — trigger the block.

Frequently asked questions

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

Section 17(5) is the negative list of GST input tax credit — categories where ITC cannot be claimed even though the expense is for business: passenger motor vehicles (≤13 seats), vessels/aircraft, their insurance and repair, food and catering, beauty and health services, vehicle hire, life/health insurance, club and gym membership, vacation travel benefits, works contract and own-account construction of immovable property, composition inward supplies, non-resident procurement, CSR spend, personal consumption, goods lost/stolen/destroyed/gifted, and tax paid on s.74 fraud demands (up to FY 2023-24).

Is ITC available on cars purchased for business use?+

Not for ordinary business use — a car (≤13 seats) for directors or employees is blocked by s.17(5)(a) even if used wholly for business. ITC IS available if you deal in vehicles (further supply), run a passenger-transport business, or impart driving training — and goods-transport vehicles and vehicles above 13 seats are outside the block altogether.

Can I claim ITC on canteen or food expenses for employees?+

Blocked by default under s.17(5)(b)(i) — unless providing food is OBLIGATORY under a law, e.g. the s.46 Factories Act canteen for factories with 250+ workers. Then the proviso restores the credit, generally to the extent of cost borne by the employer (per Circular 172/04/2022-GST and subsequent clarifications). A voluntary cafeteria in an office attracts no credit.

Is ITC blocked on works contract and construction of a building?+

Yes — works contract services (clause (c)) and goods/services for own-account construction (clause (d)) of immovable property are blocked, to the extent capitalised. Exceptions: construction of PLANT AND MACHINERY (including its foundation and structural supports), and works contract taken as input for a further works contract supply. Finance Act 2025 made "plant and machinery" the operative phrase in both clauses retrospectively from 01-07-2017, overriding the Safari Retreats functionality test for buildings.

What counts as "plant and machinery" for the construction exception?+

Apparatus, equipment and machinery fixed to earth by foundation or structural support, used for making outward supply — including the foundation and structural supports themselves — but excluding land, buildings or any other civil structures, telecommunication towers, and pipelines laid outside the factory premises (Explanation to s.17). A machine’s civil foundation is creditable; the factory shed around it is not.

Is ITC available on CSR expenditure under GST?+

No — clause (fa), inserted by Finance Act 2023 effective 1 October 2023, blocks ITC on goods and services used for CSR obligations under s.135 of the Companies Act. The amendment is prospective, so credit for supplies received before 01-10-2023 remains arguable (rulings had gone both ways). Voluntary charity outside the s.135 obligation is tested under s.16 and the gifts clause (h) instead.

Is ITC blocked on employee health insurance and group mediclaim?+

Voluntary employee life/health insurance is blocked under s.17(5)(b). It becomes creditable where a law in force makes providing the insurance obligatory for the employer — as happened under specific government mandates — or where the buyer is an insurer making an outward supply of the same category (reinsurance). Keep the statutory mandate on file; an HR policy is not a "law".

Do I need to reverse ITC on goods destroyed, expired or given as free samples?+

Yes — s.17(5)(h) blocks ITC on goods lost, stolen, destroyed, written off, or disposed of as gifts or free samples: expired pharma stock, damaged inventory, promotional giveaways. Exceptions by clarification: free warranty replacements need no reversal (Circular 195/07/2023) and buy-one-get-one offers are priced supplies, not gifts (Circular 92/11/2019).

Is ITC blocked for tax paid on GST demand orders?+

Only narrowly now. As amended by Finance (No. 2) Act 2024 (w.e.f. 01-11-2024), clause (i) blocks ITC of tax paid under s.74 (fraud/suppression) for periods up to FY 2023-24. Demands for FY 2024-25 onwards proceed under s.74A, which clause (i) does not cover, and the earlier block on s.129 (detention) and s.130 (confiscation) payments has been deleted.

Authoritative sources

Section 17(5), CGST Act 2017 (as amended) — Blocked-credit list; clause (fa) ins. Finance Act 2023 w.e.f. 01-10-2023; clause (i) amended by Finance (No. 2) Act 2024 w.e.f. 01-11-2024; "plant and machinery" in clause (d) substituted retrospectively by Finance Act 2025.

Circular 172/04/2022-GST — proviso to s.17(5)(b) applies to the whole clause — Clarifies the employer-obligation proviso covers every limb of clause (b), and perquisites under contractual employment terms.

Chief Commissioner of CGST v. Safari Retreats (SC, 03-10-2024) — Read "plant or machinery" in clause (d) as permitting a functionality test — subsequently overridden by the retrospective Finance Act 2025 substitution.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

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Last reviewed: 2026-07-29 · For informational purposes only — not professional advice.