Section 17(5) Blocked ITC: Complete List of Ineligible Input Tax Credit

Section 17(5) of the CGST Act specifies a list of goods and services on which ITC is completely blocked, regardless of whether they are used for business purposes. This is a critical compliance area — claiming blocked ITC is treated as excess ITC claim.

Complete List of Blocked ITC Under Section 17(5)

Category 1: Motor Vehicles and Conveyances ITC is blocked on motor vehicles used for transportation of persons (capacity up to 13 persons including driver).

Exceptions (ITC allowed): - Motor vehicles used for: further supply of such vehicles, transportation of passengers, imparting training on driving - Vessels and aircraft (if used for transport of goods, transport of passengers, or training)

Category 2: Food, Beverages, and Outdoor Catering ITC blocked on: - Food and beverages - Outdoor catering - Beauty treatment - Health services - Cosmetic/plastic surgery - Life/health/other insurance (unless mandatory under law) - Travel benefits extended to employees (leave travel, home travel)

Category 3: Club Memberships, Health, and Fitness ITC blocked on membership of a club, health and fitness centre.

Category 4: Rent-a-Cab, Life Insurance, Health Insurance Blocked unless the government mandates the employer to provide such services to employees, OR it is part of a recognized obligation.

Category 5: Works Contract Services (for immovable property) ITC on works contract services is blocked when used for construction of immovable property (other than plant and machinery).

Category 6: Goods or Services for Construction ITC blocked on goods and services received for construction of immovable property on own account, even if used for furtherance of business. Exception: Plant and machinery.

Category 7: Goods or Services Received by Non-Resident Taxable Person Except goods imported by such person.

Category 8: Personal Consumption Any goods or services used for personal consumption.

Category 9: Goods Lost, Stolen, Destroyed, Written Off ITC must be reversed if goods are lost, stolen, destroyed, or written off.

Category 10: Tax Paid for Fraud Cases ITC blocked where tax is paid under Section 74 (fraud/suppression), Section 129 (detention/seizure), or Section 130 (confiscation).

Common Mistakes Businesses Make

- Claiming ITC on office renovation (works contract for immovable property) - Claiming ITC on restaurant bills and client entertainment - Claiming ITC on health insurance premium for employees (unless mandatory) - Claiming ITC on car purchase/maintenance for a non-transport business

Audit Red Flag

Section 17(5) reversals are specifically checked in Section 65 audits. Officers demand the purchase register and match blocked-ITC categories against claimed ITC. Any undetected blocked ITC results in demand under Section 73/74/74A.

Disclaimer: Consult your CA for case-specific advice.