Blocked Credit Under Section 17(5)
Meaning & Full List
5 min readBlocked credit is GST you pay on a business purchase but cannot claim back as input tax credit, because section 17(5) of the CGST Act names that kind of purchase as ineligible.
What Is Blocked Credit?
The block applies even when every other condition is met: a valid invoice, goods received, the supplier’s return filed. Under the Act’s own wording, the list in section 17(5) applies “notwithstanding” the general right to credit, so the GST on these items becomes a plain cost.
What Section 17(5) Blocks
Most of the list is about spending that looks personal or long-term, and almost every clause has an exception worth knowing.
| Clause | What is blocked | Main exception |
|---|---|---|
| (a) | Motor vehicles carrying up to 13 people | Resale, passenger transport, driving training |
| (aa) | Vessels and aircraft | Resale, passenger or goods transport, training |
| (ab) | Insurance and repair of those vehicles, vessels and aircraft | Used for those purposes, or bought by their maker or insurer |
| (b)(i) | Food and drinks, outdoor catering, beauty, health services, renting motor vehicles, vessels or aircraft, life and health insurance | Used for an outward supply of the same category, or in a taxable composite or mixed supply |
| (b)(ii), (iii) | Club and gym membership, holiday travel for staff | Where a law obliges the employer to provide it, an exception often read as covering all of (b) |
| (c) | Works contracts for building immovable property | Plant and machinery, or a contractor’s own works contract supply |
| (d) | Goods and services to build your own immovable property, including capitalised repairs | Plant and machinery |
| (e) | Purchases taxed under the composition scheme | None |
| (f) | Purchases by a non-resident taxable person | Goods it imports |
| (fa) | CSR spending | None |
| (g) | Personal consumption | None |
| (h) | Goods lost, stolen, destroyed, written off, gifted or given as free samples | None |
| (i) | Tax paid under section 74 for periods up to 2023-24 | None |
The Clause That Matters at Diwali
Clause (h) is the one festive spending runs into. Hampers for staff, sweet boxes for clients and free samples handed out at a stall are all “disposed of by way of gift or free samples”, so the GST paid on them cannot be claimed back.
Clause (b) catches the office Diwali party, because food, drinks and outdoor catering for your own staff are blocked in the ordinary case. But it also carries the most useful exception on the list: a caterer who hires another caterer for part of a large order can claim the credit, because it is buying the same category of service it sells.
Blocked Credit vs Credit Reversal
Both end with GST you cannot use, which is why owners mix them up, but they work in opposite directions.
| Aspect | Blocked credit | Credit reversal |
|---|---|---|
| When | Never claimable for that use | Claimed, then taken back |
| Why | The purchase is on the 17(5) list | Something changed after the claim |
| Example | Staff party catering | Supplier unpaid after 180 days |
| Comes back? | No | Sometimes, as under the 180-day rule |
The 180-day rule in section 16 is the common reversal: if you do not pay a supplier within 180 days of the invoice, the credit is paid back with interest, and you can take it again once you pay. Reverse charge purchases are outside this rule. And clause (h) can sit on both sides, because stock bought for sale is claimed normally and then reversed if it is later given away.
Blocked Credit Example
A kadalai mittai maker in Kovilpatti reviews its October 2026 purchase bills before filing: hampers for its 24 staff, catering for the staff Diwali party, a repair to the owner’s car and a new label printer.
| Purchase | GST paid | Credit |
|---|---|---|
| Hampers | Rs.2,400 | Blocked, clause (h) |
| Party | Rs.3,150 | Blocked, clause (b) |
| Car repair | Rs.2,700 | Blocked, clause (ab) |
| Printer | Rs.1,080 | Claimable |
| Total | Rs.9,330 | Rs.1,080 claimable |
Note: this is an invented example for illustration only. The business and amounts are not real.
Rs.8,250 of the GST paid that month stays in the business as a cost. The printer is used to make goods for sale, so its credit flows normally.
Where Businesses Slip
Three slips to watch for:
- Claiming first, checking later. Credit on a blocked item that slips into the return has to be reversed, and interest can follow if it was used.
- Forgetting stock that turns into a gift. Goods bought for resale and later handed out as samples or gifts fall under clause (h) at that point.
- Reading “plant or machinery” too widely. An explanation now in the Act says the phrase in clause (d) must be read as “plant and machinery”, so a building does not escape the block simply because it houses machines.
A monthly ITC reconciliation with a column marking blocked items catches most of this before the return goes in.
Check Blocked Credit Before You File
The clean habit is to mark a purchase as blocked in your own records on the day the bill arrives, not at the end of the month. Petpooja Invoice gives real-time visibility of your GST liability, including tax payable, input tax credit and cash ledger balance, so the credit you expect to use is in view before filing. Our ITC calculator helps you check the numbers.
Frequently Asked Questions
Is GST on a delivery van blocked?
No. Clause (a) covers motor vehicles for carrying people with up to 13 seats. A goods vehicle used in the business is outside it, so its credit is generally available.
Is GST on a staff canteen blocked?
Usually, because food and beverages fall under clause (b). Where a law requires the employer to provide the canteen, the exception for obligatory benefits can apply, so check the specific law with your CA.
Does blocked credit matter to a composition dealer?
Not directly. Under section 10(4), a business on the composition scheme cannot claim input tax credit at all, so the blocked list changes nothing for its own purchases.
Is GST on a mobile phone for the owner blocked?
It depends on use. A phone used in the business carries normal credit, while one bought for personal use falls under clause (g), personal consumption. Where it serves both, work out the personal share with your CA.