Claiming a blocked credit is one of the most common reasons for GST notices and audit objections. The credit has to be paid back with interest, so it is worth getting the list right in the books from the start.
The blocked items and their exceptions
| Blocked | When credit is still allowed |
|---|---|
| Motor vehicles for carrying people, seating up to 13 including the driver, and their insurance, repair and servicing | When used to sell such vehicles, carry passengers or train drivers; repair and insurance credit for vehicle makers and insurers in specified cases |
| Vessels and aircraft | When used to supply them, carry passengers or goods, or for training |
| Food and beverages, outdoor catering, beauty treatment, health services, cosmetic surgery, leasing or hiring of cars, life and health insurance | When you supply the same kind of service, or as part of a mixed or composite supply, or where a law requires the employer to provide it to employees |
| Membership of a club or health and fitness centre | No exception |
| Travel benefits to employees on leave or vacation, such as leave travel | Where a law requires the employer to provide it |
| Works contracts and goods or services for building an immovable property on your own account | Plant and machinery, which excludes land, buildings and civil structures |
| Goods or services used for CSR obligations under section 135 of the Companies Act | No exception |
| Tax paid under composition | No exception |
| Goods lost, stolen, destroyed, written off, given as gifts or free samples | No exception |
| Goods or services for personal consumption | No exception |
| Tax paid on demands raised for fraud, wilful misstatement or suppression | No exception |
Buildings: plant and machinery after Safari Retreats
In October 2024 the Supreme Court held in Safari Retreats that a building can be "plant" under the old wording "plant or machinery" in section 17(5)(d), depending on its function, for example a mall built for letting. The Finance Act, 2025 then replaced "plant or machinery" with "plant and machinery" with retrospective effect from 1 July 2017.
The practical effect is that credit on constructing a building for your own use or for letting remains blocked, while credit on plant and machinery fixed to the earth, such as machinery foundations, stays available. Disputes on this point are continuing, so take advice on large projects.
Other conditions that stop a credit
- The invoice must appear in your GSTR-2B, and the supplier must have paid the tax (section 16(2)). See our ITC reconciliation guide.
- Credit must be taken by 30 November after the end of the financial year, or the annual return date if earlier (section 16(4)).
- If you do not pay the supplier within 180 days of the invoice, the credit must be reversed until you pay.
- Composition taxpayers cannot claim credit at all; see composition vs regular scheme.
If you have claimed a blocked credit
Reverse it in GSTR-3B and pay interest; interest applies at 18% a year on credit that was both taken and used. Doing it yourself, before a notice, avoids a penalty dispute. If a notice has already arrived, see GST notice reply.
Talk to Regikart
We review your purchase register for blocked credits, set up the right ledger mapping and handle reversals and notices. See GST return filing or call or WhatsApp +91 70444 94804.
Frequently asked questions
Can I claim GST input tax credit on a car purchased for the business?
Not for a passenger vehicle seating up to 13 people including the driver, unless it is used to sell vehicles, carry passengers for a fee or train drivers. Goods carriages are not blocked.
Is ITC available on food and staff welfare expenses?
Generally no. Food and beverages are blocked unless you supply the same service, or a law requires the employer to provide it to employees.
Can I claim ITC on construction of an office building?
No. Credit for constructing an immovable property on your own account is blocked, except for plant and machinery. The Finance Act, 2025 confirmed the "plant and machinery" wording from 1 July 2017.
Is ITC allowed on CSR expenses?
No. Goods or services used for CSR obligations under section 135 of the Companies Act are blocked.
Is ITC available on gifts to customers or employees?
No. Credit on goods given as gifts or free samples is blocked.
About the author
Regikart CA Team
Chartered Accountants at Regikart. Want to discuss this in the context of your business?
