The Section 17(5) list appears in every GST article. What is usually left out is this:
Every clause carries an exception — and most businesses never use them.
People either treat everything as blocked and surrender valid credit, or claim everything and get caught. Both are expensive.
# Motor vehicles — "no ITC on cars" is half true
Look at what the restriction actually says. Blocked are:
Motor vehicles for transportation of persons with an approved seating capacity of not more than 13 persons (including the driver)
Two things sit outside it:
| What | ITC |
|---|---|
| Goods carriage — truck, tempo, delivery van | Available — never restricted |
| Seating capacity of 14 or more | Available — outside the 13 limit |
| Car or SUV (≤13 seats) for transporting persons | Blocked |
And three exceptions, where even a small vehicle carries ITC:
- You make further supply of such vehicles — you are a dealer
- You provide passenger transportation services — taxi, bus operator
- You run a driving school where those vehicles are used for training
The same structure applies to vessels and aircraft, and the insurance, servicing and repair of these assets is restricted only where the underlying asset is restricted.
# Food, insurance, club — and the exception everyone misses
Blocked:
- Food and beverages, outdoor catering
- Beauty treatment, health services, cosmetic surgery
- Life and health insurance
- Club, health and fitness centre membership
- Travel benefits to employees (leave or home travel concession)
Now the exception:
Checking this is a one-time exercise, and the answer depends on your sector, your state's labour rules and your headcount. Ask your CA to confirm it specifically for your business — the answer differs from business to business, and where it applies the amount is rarely small.
# CSR — the entire GST is your cost
Section 17(5)(fa) blocks ITC on goods and services used for CSR activities. It came in through the Finance Act 2023.
# Construction — where the story gets complicated
This is the most contested clause, so here is the timeline plainly.
There are two clauses:
- 17(5)(c) — works contract services for construction of immovable property (other than plant and machinery). Exception: where it is an input service for the further supply of works contract service.
- 17(5)(d) — goods or services for construction of immovable property on one's own account
Now the sequence:
| When | What happened |
|---|---|
| Oct 2024 | Supreme Court, Safari Retreats — decided in favour of the assessee. The Court noted that 17(5)(d) says "plant or machinery", which differs from the "plant and machinery" definition in Section 17, and applied a functionality test: if the building functions as a plant for that business, ITC can be available. Each case turns on its facts. |
| Finance Act 2025 | Section 119 changed the wording to "plant and machinery", retrospectively from 1 July 2017, expressly stating it applies notwithstanding any judgment |
| May 2025 | The Supreme Court dismissed the review petition — its judgment stands |
# The remaining blocked credits
| Clause | What is blocked |
|---|---|
| 17(5)(e) | Supplies from a composition supplier — recipient gets no ITC |
| 17(5)(f) | Non-resident taxable person (other than imported goods) |
| 17(5)(g) | Goods or services for personal consumption |
| 17(5)(h) | Goods lost, stolen, destroyed, written off, or disposed of as gifts or free samples |
| 17(5)(i) | Tax paid in fraud, detention or confiscation cases |
# What to do today
- Review the vehicle register — are you surrendering ITC on goods carriage or 14-seaters?
- Employee benefits — which items are legally obligatory for you? Get it in writing from your CA
- CSR budget — is it approved on a GST-inclusive or exclusive figure?
- Construction exposure — build the computation now, even if you do not claim
- Reconcile write-off, free sample and gift ledgers against the purchase register
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Also useful
Frequently asked questions
Is ITC on motor vehicles completely blocked?
No, that is only half the picture. The restriction applies to motor vehicles for transportation of persons with an approved seating capacity of not more than 13 persons, including the driver. Anything with 14 seats or more falls outside it. And goods carriage is not restricted at all — trucks, tempos and delivery vans carry full ITC.
What are the exceptions for cars?
Three. First, if you make further supply of such vehicles, meaning you are a dealer. Second, if you provide passenger transportation services, such as a taxi or bus operator. Third, if you run a driving school where those vehicles are used for training. In these three cases ITC is available even on a small vehicle.
Is ITC available on health insurance provided to employees?
Generally no, but there is a significant exception. Where it is obligatory for an employer to provide something to employees under any law in force, ITC is available. This exception covers food, beverages, health services and insurance alike. Many employers never check which items are statutorily obligatory for them.
Is ITC available on CSR spending?
No. Section 17(5)(fa) blocks ITC on goods and services used for CSR activities. This came in through the Finance Act 2023. It means the entire GST on CSR spending is a cost to you, so CSR budgets should be approved on a GST-inclusive figure.
Is ITC available on constructing a building that will be let out on rent?
This is the most contested question in GST. In October 2024 the Supreme Court decided Safari Retreats in favour of the assessee, reading 'plant or machinery' separately and applying a functionality test. The Finance Act 2025 then changed the wording to 'plant and machinery' with retrospective effect from 1 July 2017. The statutory position today is one of restriction.
So is the Safari Retreats judgment now irrelevant?
It is not that simple. The Supreme Court dismissed the review petition in May 2025, so its judgment stands. But the amendment is retrospective and expressly states that it applies notwithstanding any judgment. Nullifying a judgment retrospectively raises its own constitutional questions. This will be litigated, and anyone offering a confident one-line answer either way is going beyond what is settled.
What happens to ITC on free samples and gifts?
It is blocked. Goods that are lost, stolen, destroyed, written off, or disposed of by way of gift or free samples all fall under the restriction. Marketing distributes free samples and the accounts team claims ITC on the purchase invoice — this is one of the most common findings in scrutiny.
What if blocked credit has already been claimed by mistake?
Reverse it with interest. The earlier you find it yourself, the cheaper it is. Your purchase register should be reviewed against the Section 17(5) list once a year, particularly the motor vehicle, insurance, club membership, employee benefit and construction heads.