Facility to avail Input Tax Credit of almost all inputs used for the furtherance of business is considered as one of the most beneficial features of GST law. Registered person can claim ITC of goods, services or both if received in the course of furtherance of business provided certain conditions stipulated under section 16 & 18 of CGST Act, 2017 are complied.

GST law has, however, restricted the ITC of few supplies, notwithstanding anything contained in Section 16 and section 18. Blocked credits have been listed under section 17(5), which has been amended from time-to-time to bring clarity to various provisions contained therein.

Blocked Credits:

Input tax credit shall not be available in respect of the following, namely: –

Clause (a) : Motor vehicles for transportation of persons

• Motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver).

Exceptions: ITC shall be availed if such motor vehicles are used for;

• Further supply of such motor vehicles; or
• Transportation of passengers; or
• Imparting training on driving such motor vehicles;

Clause (aa): Vessels and Aircraft

Exceptions: ITC shall be availed if such vessels and aircraft are used for transportation of goods or making the following taxable supplies;

• Further supply of such vessels or aircraft or
• Transportation of passengers or
• Imparting training on navigating such vessels or
• Imparting training on flying such aircraft

Clause (ab): Services related to Motor vehicles for transportation of persons, vessels and aircraft

Services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in (a) or (aa) above

Exceptions: ITC shall be availed if such motor vehicles, vessels or aircraft are;

• Used for he specified purposes therein
• Received by a taxable person engaged in the manufacture of such motor vehicles, vessels or aircraft; or in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him

Clause (b) : Food and beverages, outdoor catering, life insurance, health insurance and few other services

Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in (a) or (aa) except when used for the purposes specified therein, life insurance and health insurance

Exceptions: ITC shall be availed if inward supply of these are used for making an outward supply of same category or as an element of a taxable composite or mixed supply

Clause (c) : Membership of a club, health and fitness Centre

Clause (d) : Travel benefits extended to employees on vacation

Travel benefits extended to employees on vacation such as leave or home travel concession

Exceptions: ITC shall be availed if the above supply is obligatory for an employer to provide to its employees under any law for the time being in force

Clause (e) : Works contract services

Works contract services when supplied for construction of an immovable property

Exceptions: ITC shall be availed if such service is availed for construction of plant and machinery or is an input service for further supply of works contract service

Clause (f) : Construction of an immovable property

Inward supply for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business and is not capitalized

Note: “Plant and machinery” mentioned in (e) & (f) means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply and includes such foundation and structural supports but excludes –

• Land, building or any other civil structures
• Telecommunication towers
• Pipelines laid outside the factory premises.

Clause (g) : Tax has been paid under composition scheme

Inward supply on which tax has been paid under section 10 (composite scheme)

Clause (h) : Supply received by a non-resident taxable

Inward supply received by a non-resident taxable person except on goods imported by him

Clause (i) : Supply used for personal consumption

Clause (j) : Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples

Clause (k) : Tax paid under special circumstances

Any tax paid in accordance with the provisions of sections 74 (fraud), 129 (seize) and 130 (confiscation)