BLOCKED CREDITS Section 17(5) of CGST Act - Cases Where Input Tax Credit under GST Cannot Be Availed

ITC of tax paid on almost every inputs and input services used for supply of taxable goods or services or both is allowed under GST except a small list of items provided u/s 17(5). The negative list covers mainly items of personal consumption, inputs use of which results into formation  of an immovable property (Except plant and machinery), telecommunication towers, pipelines laid outside the factory premises, etc. and taxes paid as a result of detection of evasion of taxes. The detailed list is given hereunder :-

• Motor vehicles and conveyances, EXCEPT WHEN USED
• For transportation of goods
• For making the following taxable supplies:
• further supply of such vehicles of conveyances; or
• Transportation of passengers; or
• Imparting training on driving, flying, navigating such vehicles or conveyances.

A car dealer is allowed ITC on cars purchased for resale; a cab service is allowed ITC on cars purchased for use as cabs; a driving school is allowed ITC on cars purchased for use in teaching driving.

• Food abd beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery EXCEPT WHEN
• A inward supply of these is used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply.

A caterer for a wedding gets the sweet dish course supplied by a specialist in desserts. He allowed ITC of the tax paid by him to the specialist.

• Membership of a club, health and fitness centre

• Rent-a-cab, life insurance and health insurance, EXCEPT WHERE
• The government has made it obligatory for an employer to provide any of these services to its employees; or
• Inward supply of these services is used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply.

• Travel benefits to employees on vacation such as ITC or home travel concession

• Works contract srvices for construction of an immovable property  EXCEPT WHEN
• It is input service for further supply of works contract services
• Immovable property is plant machinery

• Inward supplies received by a taxable person for consumption of an immovable property (other than plant and mahinery) on his own account even when such supplies are used in the course or furtherance of business

A company buys material ans hires a contractor to construct an office building to house the plant supervisory staff. The input tax credit on such goods and services is not allowed as credit.

• Inward supplies on which tax has been paid under the COMPOSITION SCHEME

• Inward supplies received by a NON RESIDENT taxable person except goods imported by him

• Goods and/or services used for PERSONAL CONSUMPTION

• Goods that are lost, stolen. destryed, written off, or disposed of way of gift or free samples

• Tax paid under sections 74, 129 and 130. (These sections prescrived the provisions relation to tax paid as a result of evasion of taxes, or upon detention of goods or conveyances in transit, or toward redemption of confiscated goods/conveyances. )