Not all GST paid on purchases can be claimed as Input Tax Credit. Section 17(5) of the CGST Act lists specific categories where ITC is blocked.

KEY BLOCKED CATEGORIES

Motor vehicles and conveyances: ITC on purchase, lease, or hire of motor vehicles is blocked. Exceptions exist for vehicles used for transportation of goods, transportation of passengers, imparting training on driving or flying, and for motor vehicle dealers. Related general insurance, servicing, repair, and maintenance follow the same exceptions.

Vessels and aircraft: Similar restrictions apply, with exceptions for transportation of goods, training on navigating or flying, and for dealers.

Food, beverages, and outdoor catering: ITC is blocked unless the supply is obligatory under any law, or when used for making an outward taxable supply of the same category or as part of a taxable composite or mixed supply.

Health services: Blocked unless obligatory under law, or used for outward taxable supply of the same category or as part of a taxable composite or mixed supply.

Life and health insurance: Blocked unless obligatory under law, used for outward supply of the same category, or as element of a taxable composite or mixed supply.

Travel benefits to employees: Blocked unless obligatory under law or used for taxable outward supply.

Club, health, and fitness centre memberships: Blocked unless obligatory under any law as per CBIC Circular 172/04/2022-GST.

Works contract services: ITC on works contract for construction of immovable property is blocked except when received for further supply of works contract service. Construction on own account under clause (d) is blocked without this exception.

Goods or services for construction of immovable property on own account: Blocked, including reconstruction, renovation, and additions to the extent capitalised.

Goods lost, stolen, destroyed, written off, or disposed of by way of gift: ITC must be reversed.

Tax paid under Section 74 for fraud or wilful misstatement: ITC blocked for periods up to FY 2023-24.

PRACTICAL TIP
Before claiming ITC on any purchase, check it against this list. The most commonly missed blocks are food for staff, vehicle insurance, and works contract for office renovation.