ITC is BLOCKED on the following inward supplies (Section 17(5)(b)):
Category
Examples
Food and Beverages
Outdoor catering, confectionery
Beauty
Beauty treatment, cosmetic & plastic surgery
Health
Health services, life and health insurance
Club/Fitness
Membership of club, health & fitness centre
Employee Travel
Travel benefit on vacation (LTC/LTA)
Rented Conveyance
Renting/leasing/hiring of motor vehicle, vessel or aircraft on which ITC is otherwise blocked under (1)/(2)
## Exceptions — ITC ALLOWED when:
(i) Same-category onward supply / Element of composite or mixed supply
The blocked inward supply is itself used to provide an outward supply of the same category (e.g. a caterer buying catering services), OR is part of a taxable composite/mixed supply.
(ii) Statutory obligation on employer
The supply is given to employees because law mandates it.
Company policy ≠ statutory obligation — voluntary employer welfare is still blocked.
Worked example
### Example 1
Example 1 — Rented car: dual perspective
ABC Ltd. hires a car from XYZ Ltd. for use by its director. XYZ Ltd. in turn took the car on rent from Maruti Ltd.
ABC Ltd.: ITC blocked — hired a motor vehicle on which ITC itself would have been blocked.
ABC Ltd. awards canteen contract to XYZ Ltd. for its factory workers.
If the Factories Act / state law obligates ABC to provide canteen → ITC allowed (statutory obligation exception).
If provided voluntarily as employee welfare → ITC blocked.
### Example 3
Example 3 — Gym membership
Gym/health centre membership paid for senior employees under company HR policy.
ITC blocked — company policy is not a statutory obligation.
⚠️ Common exam mistakes
Treating company HR policy as 'statutory obligation' — only law-mandated supplies qualify for the exception.
Claiming ITC on rented car for director simply because it's used for 'business' — the same blocked-credit logic applies to rentals.
Missing the 'same-category' exception that helps caterers, beauty parlours, gyms etc. claim ITC on their inward supplies.
Claiming ITC on LTC/LTA reimbursed travel — this is specifically blocked.
Bare-Act text Section 17(5)(b) · CGST Act, 2017 · click to expand
Section 17(5)(b): the following supply of goods or services or both —
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing/renting/hiring of motor vehicles/vessels/aircraft referred to in clause (a) or (aa) except when used for purposes specified therein, life insurance and health insurance: Provided that ITC shall be available where used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
(iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that ITC shall be available where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.