Section 17(5) blocked credits: cars, food, gifts, building works and the exceptions small businesses miss

Last updated 21 Oct 2026 · India

Short answer. Section 17(5) of the CGST Act blocks ITC on some purchases even if they are used in business. The main ones: motor vehicles for up to 13 persons (with exceptions), food, beverages, outdoor catering, beauty, health and club memberships, works contracts and goods/services for building immovable property (except plant and machinery), goods lost, stolen, destroyed, written off or given as gifts or free samples, tax paid under composition, and tax paid after demand for fraud.

The list in plain words

Purchase	ITC?	Main exception
Car / motor vehicle for up to 13 persons (and its repair, insurance)	Blocked	Used for further supply of vehicles, passenger transport, driving training
Vehicles for transport of goods	Allowed	Not in the blocked list
Food, beverages, outdoor catering, beauty, health, cosmetic surgery	Blocked	Same category supplied onward, or obligatory for employers under a law
Club, health or fitness memberships	Blocked	None in practice
Travel benefits to employees on leave or home travel	Blocked	Obligatory under a law
Construction of building / works contract (own account)	Blocked	Plant and machinery; works contractor supplying onward
Gifts, free samples, lost or stolen goods	Blocked	None

Examples

Diwali gift hampers for clients: ITC on the hampers is blocked.
A pick-up truck for deliveries: ITC allowed.
An office sedan for the director: blocked.
Lift and AC plant installed in a new office: many treat as plant and machinery; take advice on your facts.

Common mistakes

Claiming ITC first and "fixing it later". Wrong ITC carries interest and possibly penalty.
Not reversing ITC on goods later given free or written off. Reverse when it happens.
Treating staff canteen as always allowed. Only when a law makes it obligatory for the employer.

Checklist

Purchase ledger tagged for 17(5) categories
Vehicle purpose recorded
Gifts and samples tracked for reversal
Building vs plant and machinery decided with your CA

Frequently asked questions

Can I claim GST ITC on a company car?

Generally no. Motor vehicles for up to 13 persons are blocked under section 17(5), unless used for further supply of vehicles, transport of passengers or driving training.

Is ITC allowed on Diwali gifts to clients?

No. Goods disposed of as gifts are blocked under section 17(5).

Is ITC allowed on goods vehicles?

Yes. Vehicles used for transporting goods are not in the blocked list.

Is ITC allowed on construction of my office building?

No, for works contracts and goods or services used for constructing immovable property on your own account, except plant and machinery.

Official sources

Not tax or legal advice. This is a free explainer of public rules; deadlines and rules can change by notification, so confirm on the official portal or with your CA before you file. Last checked 21 Oct 2026.

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