# Blocked Credits — Section 17(5)

Section 17(5) lists categories where ITC is NOT available ('blocked'), notwithstanding Sections 16(1) and 18(1). This lesson focuses on the first three categories: Motor Vehicles, Vessels/Aircraft, and related services.

## (a) Motor Vehicles for Transportation of Persons — Seating Capacity ≤ 13 (including driver)

ITC is BLOCKED on motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons (including the driver).

### Exceptions — ITC is ALLOWED when such motor vehicles are used for:

1. Further supply of such motor vehicles (i.e., dealing/trading in motor vehicles).

2. Transportation of passengers (e.g., cab aggregators, taxi services).

3. Imparting training on driving such motor vehicles (driving schools).

Note: For motor vehicles with seating capacity > 13 persons (e.g., buses), ITC is generally available even for normal business use.

## (aa) Vessels and Aircraft

ITC is BLOCKED on vessels and aircraft.

### Exceptions — ITC is ALLOWED when used for:

1. Further supply of such vessels or aircraft (dealing in vessels/aircraft).

2. Transportation of passengers by vessel/aircraft.

3. Imparting training on navigating such vessels OR on flying such aircraft.

4. Transportation of goods by vessel or aircraft.

## (ab) Services of General Insurance, Servicing, Repair and Maintenance

ITC on general insurance, servicing, repair and maintenance services in respect of motor vehicles, vessels, or aircraft referred to in clauses (a) and (aa) is BLOCKED.

### Exceptions — ITC is ALLOWED when:

1. The motor vehicle/vessel/aircraft is used for the permitted purposes listed in (a) or (aa) above (i.e., further supply, passenger transport, training, goods transport for vessels/aircraft).

2. The recipient is engaged in the manufacture of such motor vehicles, vessels, or aircraft.

3. The recipient is engaged in supplying general insurance services in respect of such motor vehicles, vessels, or aircraft insured by him.

## Summary Table

Item	Default	Exceptions (ITC Allowed)
MV ≤ 13 seats (passenger)	Blocked	Dealing / Passenger transport / Driving training
Vessel / Aircraft	Blocked	Dealing / Passenger transport / Training / Goods transport
Insurance, Repair, Maintenance of above	Blocked	Used for permitted purposes / Manufacturer / Insurer of such MV/Vessel/Aircraft

Worked example

### Example 1

Example 1 — Company Car:

ABC Ltd., a software company, purchases a car (seating capacity 5) for use by its CEO. GST on car = ₹3,00,000.

→ ITC is BLOCKED (not used for dealing/passenger transport/driving training). Cost of car = ₹X + ₹3,00,000.

### Example 2

Example 2 — Cab Aggregator:

Ola Ltd. purchases 100 cars (seating capacity 5) to provide passenger transport services.

→ ITC is ALLOWED as the cars are used for transportation of passengers (exception applies).

### Example 3

Example 3 — Bus for Employees:

XYZ Ltd. purchases a bus with seating capacity of 30 persons for employee transportation.

→ ITC is ALLOWED because the seating capacity exceeds 13. (Note: Subject to further conditions if used for personal/exempt purposes.)

### Example 4

Example 4 — Aircraft for Cargo:

Air Cargo Ltd. purchases an aircraft for transportation of goods.

→ ITC is ALLOWED (transportation of goods by aircraft is a specified exception).

### Example 5

Example 5 — Repair of CEO's Car:

ABC Ltd. (from Example 1) incurs ₹50,000 + GST ₹9,000 on servicing the CEO's car.

→ ITC of ₹9,000 is BLOCKED because the underlying car itself is a blocked credit. Insurance, repair, and maintenance follow the same fate as the asset.

### Example 6

Example 6 — Car Manufacturer's Repair Costs:

Maruti Ltd. (engaged in manufacture of motor vehicles) incurs repair/insurance expenses on cars in its inventory.

→ ITC is ALLOWED because Maruti is engaged in manufacture of such motor vehicles (manufacturer exception).

⚠️ Common exam mistakes

Assuming ITC is always blocked on all motor vehicles — it depends on seating capacity (≤ 13) and use.
Forgetting that the seating capacity threshold of 13 INCLUDES the driver.
Confusing the rule for vessels/aircraft with motor vehicles — vessels/aircraft have an additional exception for 'transportation of goods', which is NOT an exception for ≤ 13-seater MVs.
Claiming ITC on insurance/repair/maintenance of a CEO's car merely because such services are 'normal business expense' — they follow the blocked-credit status of the underlying vehicle.
Forgetting the manufacturer exception — manufacturers of MV/vessel/aircraft can claim ITC on related insurance and repair services.
Treating goods carriage motor vehicles (trucks/lorries) as blocked — Section 17(5)(a) blocks only vehicles for transportation of PERSONS, so ITC on goods vehicles is generally allowed.

Bare-Act text Section 17(5)(a), (aa), (ab) · Central Goods and Services Tax Act, 2017 · click to expand

Section 17(5): Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:— (a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:— (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles; (aa) vessels and aircraft except when they are used— (i) for making the following taxable supplies, namely:— (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available— (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged— (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him.

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Blocked Credits — Section 17(5) [Motor Vehicles, Vessels, Aircraft and related services]

Worked example

⚠️ Common exam mistakes