# GST Blocked Credit (Section 17(5)) Reference for Manufacturers > Source: https://netray.co/tools/gst-blocked-credit-section-17-5-reference-india > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Free Tools ## Short answer A plain-language lookup of the supplies on which input tax credit is blocked under Section 17(5) of the CGST Act, with the main exceptions a factory should know. ## Category regional ## Region India ## Audience - GST accountant - Finance controller - Tax manager ## Tool **Kind:** worksheet **Mode:** reference **Columns:** #### Clause **Key:** clause **Type:** text #### Supply **Key:** item **Type:** text #### General rule **Key:** rule **Type:** text #### Main exceptions **Key:** exception **Type:** text #### ERP handling **Key:** erp **Type:** text **Rows:** **Clause:** 17(5)(a) **Item:** Motor vehicles for carrying not more than 13 persons including the driver **Rule:** Credit blocked **Exception:** Allowed when used for further supply of such vehicles, transport of passengers, driver training, or similar specified uses **Erp:** Use a non-creditable tax code for staff cars **Clause:** 17(5)(aa) **Item:** Vessels and aircraft **Rule:** Credit blocked **Exception:** Allowed for specified uses such as further supply or training **Erp:** Flag fixed assets in this class **Clause:** 17(5)(ab) **Item:** Services of general insurance, servicing, repair and maintenance of blocked motor vehicles, vessels and aircraft **Rule:** Credit blocked when the underlying vehicle credit is blocked **Exception:** Allowed where the vehicle is in the allowed use categories, or where insurance is obligatory by law **Erp:** Link to the blocked asset class **Clause:** 17(5)(b)(i) **Item:** Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery **Rule:** Credit blocked **Exception:** Allowed if the same category of outward supply is made, or if the employer is obliged by law to provide it **Erp:** Separate GL for canteen and welfare items **Clause:** 17(5)(b)(ii) **Item:** Membership of a club, health and fitness centre **Rule:** Credit blocked **Exception:** Allowed only where obligatory under law **Erp:** Use a blocked tax code **Clause:** 17(5)(b)(iii) **Item:** Travel benefits extended to employees on vacation such as leave or home travel concession **Rule:** Credit blocked **Exception:** None of note **Erp:** Separate GL for LTC **Clause:** 17(5)(c) **Item:** Works contract services for construction of an immovable property other than plant and machinery **Rule:** Credit blocked **Exception:** Allowed where the construction is itself used to make an outward works contract supply **Erp:** Capitalise without credit **Clause:** 17(5)(d) **Item:** Goods or services received for constructing an immovable property on own account, including when used in the course of business **Rule:** Credit blocked **Exception:** Plant or machinery is excluded from the blocking **Erp:** Review capital work in progress postings **Clause:** 17(5)(e) **Item:** Tax paid under the composition scheme **Rule:** Credit blocked **Exception:** None **Erp:** Do not take credit on composition dealer bills **Clause:** 17(5)(f) **Item:** Goods or services received by a non-resident taxable person **Rule:** Credit blocked **Exception:** Allowed for import of goods **Erp:** Not common for factories **Clause:** 17(5)(g) **Item:** Goods or services used for personal consumption **Rule:** Credit blocked **Exception:** None **Erp:** Review expense claims **Clause:** 17(5)(h) **Item:** Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples **Rule:** Credit blocked, and credit already taken must be reversed **Exception:** Normal losses within the process are treated per the facts **Erp:** Link scrap, write-off and sample postings to a reversal report **Clause:** 17(5)(i) **Item:** Tax paid because of demand, fraud, wilful misstatement or suppression and detention or confiscation cases **Rule:** Credit blocked **Exception:** None **Erp:** Book as a cost, not as credit **Clause:** Explanation **Item:** Plant and machinery **Rule:** Means apparatus, equipment and machinery used for making outward supply, including foundation and structural supports **Exception:** Excludes land, building or any other civil structures, telecom towers and pipelines laid outside the factory premises **Erp:** Tag assets as plant and machinery or civil **Clause:** Section 16(4) **Item:** Time limit to claim credit **Rule:** Credit must be claimed by the specified return date for the financial year **Exception:** Refer to the current section text **Erp:** Run an aging report on unclaimed credit **Notes:** A summary for orientation, not legal advice or the statutory text. Section 17(5) has been amended several times. Read the current CGST Act and your tax adviser's view before reversing or claiming credit. ## Content **Intro:** Section 17(5) of the CGST Act lists supplies on which input tax credit cannot be taken, even if used in the business. This reference puts those items in one searchable table with the usual exceptions and a note on how an ERP should treat them. **Sections:** #### How to use the table **Body:** Search for the expense you are unsure about, such as vehicle, canteen or construction. Read the general rule and the exceptions. If the exception might apply, record your reasoning in the purchase document or the ITC working paper. Use the ERP column as a prompt for the tax code or GL account to use. Export the filtered rows to Excel to make an ITC eligibility checklist for your accounts payable team. #### Plant and machinery versus immovable property **Body:** The most expensive mistakes come from clauses (c) and (d). Credit on goods and services used to build a building or civil structure is blocked, but plant and machinery is carved out. The explanation says plant and machinery includes the foundation and structural supports needed to hold it, but excludes land, buildings and other civil structures. A foundation for a press is usually machinery support. A shed or office is not. Tag assets accordingly at capitalisation time. **Bullets:** - Keep a register separating plant foundations from civil work - Check whether the contract is a works contract - Document the reasoning with the engineering drawing #### Reversals and timing **Body:** Credit taken and later found ineligible must be reversed with interest, normally through the monthly return. Clause (h) is a trap for factories: scrap, write-offs and free samples all trigger a reversal of the credit on the goods concerned. Wire your inventory write-off and sample issue transactions to a monthly ITC reversal report. Section 16(4) also sets a time limit for claiming credit, so age your unclaimed invoices. #### ERP notes **Body:** Set up a separate tax code for blocked credit, so tax is posted to the expense or asset instead of an input tax account. Review how the ERP handles canteen purchases, staff vehicles and construction in progress, because these are the lines most often posted to input credit by mistake. **Cta:** If you want to find past postings where credit was taken on a blocked category, we can run a read-only analysis over your ERP purchase data. **Faq:** #### Is credit on a company car ever allowed? **Answer:** Credit on motor vehicles for up to 13 persons is blocked by default. It is allowed when the vehicle is used for further supply of vehicles, passenger transport or driver training. Cars bought for directors or staff generally do not qualify, so book the GST as a cost. #### Can I take credit on canteen food? **Answer:** Credit on food and beverages is blocked, unless you make an outward supply of the same category or the law obliges you to provide it. The Factories Act canteen duty has been argued as an obligation, so get a written view from your adviser before claiming it. #### Does the block apply to repairs of plant? **Answer:** Repairs and maintenance of plant and machinery are generally not blocked by clause (c) or (d), as they are not construction of an immovable property. Repairs to buildings and civil structures can be a different matter, depending on whether the work is capitalised or an expense. #### What happens if I already took blocked credit? **Answer:** Reverse it with interest in the next return and correct the books. Voluntary correction before a notice is normally cheaper than a demand. Keep a working paper that lists the invoices and the reason for reversal. ## Search terms section 17(5) blocked credit list, gst blocked credit list for manufacturers, itc not allowed on motor vehicle, itc on works contract immovable property, gst itc on food and beverages, blocked credit gst excel, plant and machinery itc rule, gst itc ineligible items --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json