List of Blocked Credits under Section 17(5) (Clause by Clause Analysis with examples)

 

 

 

 

Clause of Section 17(5)	Blocked Input Tax Credit (ITC)	Exceptions	Examples
(a)	Purchase of Motor Vehicles for transportation of persons	Motor vehicles with an approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies: 1.  Further supply of such motor vehicles 2.  Transportation of passengers 3.  Imparting training on driving such motor vehicles	Example: A taxi company can claim ITC for a 10 seater vehicle used for passenger transportation.
(aa)	Purchase of Vessels and Aircraft	Exceptions apply when vessels and aircraft are used for: 1.  Further supply of such vessels or aircraft 2.  Transportation of passengers 3.  Imparting training on navigating such vessels 4.  Imparting training on flying such aircraft 5.  Transportation of goods	Example: An airline can claim ITC for the purchase of an aircraft used for passenger flights.
(ab)	Services of General Insurance, Servicing, Repair, and Maintenance	These services relate to motor vehicles, vessels, or aircraft referred to in clause (a) or clause (aa). However, exceptions apply: 1.  Where the motor vehicles, vessels, or aircraft referred to in clause (a) or clause (aa) are used for the specified purposes (Thumb Rule: If the purchase of motor vehicle, vessels or aircraft is eligible, then ITC of Services of General Insurance, Servicing, Repair, and Maintenance is also eligible) 2.  When received by a taxable person engaged in: a.  Manufacturing such motor vehicles, vessels, or aircraft b.  Supplying general insurance services for such motor vehicles, vessels, or aircraft insured by them	Example: An automobile manufacturer can claim ITC for repair and maintenance services on its production vehicles.

 

                                                                                                                                       

                                                                                                                                       

 

 

(b) (i)	1)  Food and Beverages 2)  Outdoor Catering 3)  Beauty Treatment 4)  Health Services 5)  Cosmetic and Plastic Surgery 6)  Leasing, Renting, or Hiring of Motor Vehicles, Vessels, or Aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein 7)  Life Insurance and Health Insurance	The Input tax credit will be available wherean inward supply of such goods or services is used for making taxable outward supply of the same category of goods or services or as an element of taxable composite/ mixed supply.   If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services.	Example: A restaurant cannot claim ITC for GST paid on food ingredients. Health insurance or Canteen in factory compulsory under Factory’s Act, then ITC can be claimed. Hiring of Bus for transportation of employees, or cab facility,the ITC is not allowed.
(b) (ii)	Membership of a club, health and fitness centre	If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services.	Example: An insurance company cannot claim ITC for GST paid on health insurance premiums.
(b) (iii)	Travel benefits provided to employees on vacation like leave or home travel concession.	If any of these services are obligatory in nature under any law, then such registered person can claim ITC of such services.	For example, air ticket sponsored by company for holiday of employee, then ITC is not allowed.
(c)	Works Contract Service used for immovable property (other than plant & machinery) but including repair, maintenance and renovation to the extent of capitalization	The Input tax credit will be available when such works contract service is input service for further supply of works contract service.	ITC on construction of office and factory is not allowed. However, if repair & maintenance is done and the same is not capitalized in books then ITC is allowed.
(d)	Goods and services received for Construction of Immovable Property on his own account including when such goods or services or both are used in the course or furtherance of business.	The Input tax credit will be available when such works contract service is input service for further supply of construction service.	ITC of goods and services not allowed for Construction of new office /factory, whether goods are purchase by company itself.
(e)	Goods or services or both, wherein, the tax is paid under section 10 i.e. composition scheme.	NA	Goods and services on which tax is paid under composition scheme by the dealer, ITC shall not be allowed of such supply.
(f)	Goods and services received by Non-Resident Taxable Person	NA	This clause is applicable on non-resident persons only.

 

 

 

(fa)	Goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013	NA	ITC of any expense incurred by company on CSR activities, is not eligible.
(g)	Goods or services or both used for personal consumption	NA	For example, fees of director personal income tax return paid by company,then ITC on such inward supply is not allowed.
(h)	Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples	NA	Goods lost during transportation, then ITC is not allowed.
(i)	Any tax paid in accordance with the provisions of sections 74, 129 and 130. 1.  Section 74 – Tax not paid or short paid by reason of fraud or willful misstatementor suppression of facts; 2.  Section 129 – Detention, seizure and release of goods/ conveyance; 3.  Section 130 – Confiscation of goods/conveyance.	NA	ITC is not allowed where tax has been paid by any person due to fraud, wilful- misstatement.