Section 17 of CGST Act: Apportionment of Credit and Blocked Credits

Section 17 of the Central Goods and Services Tax Act, 2017 determines how input tax credit (ITC) is apportioned where purchases are used for business and non-business purposes or for taxable and exempt supplies. It also identifies categories of inward supplies on which ITC is specifically blocked.

Updated: 15 September 2026 | Chapter V - Input Tax Credit

Important current-law updates: Section 17(5)(fa) blocks ITC on goods or services used or intended to be used for activities relating to corporate social responsibility obligations under section 135 of the Companies Act, 2013. Section 17(5)(i) now refers to tax paid under section 74 for periods up to Financial Year 2023-24. Further, the Finance Act, 2025 replaced the words "plant or machinery" in section 17(5)(d) with "plant and machinery" retrospectively from 1 July 2017 and inserted a clarificatory Explanation 2.

Meaning and scope of Section 17

ITC is the credit of eligible GST paid on inward supplies, subject to the conditions of Section 16 of the CGST Act. Section 17 limits that credit where an inward supply has mixed use and separately blocks credit for specified goods, services and transactions.

Core principle: credit follows eligible business use. Where inputs, input services or capital goods are partly connected with non-business use or exempt supplies, the attributable portion is restricted or reversed in the manner prescribed by the CGST Rules.

Section 17(1) to 17(4): apportionment of input tax credit

Section 17(1) - Business and non-business use

Where goods or services or both are used partly for business and partly for other purposes, ITC is restricted to the amount attributable to business purposes.

Section 17(2) - Taxable and exempt supplies

Where goods or services or both are used partly for taxable supplies, including zero-rated supplies, and partly for exempt supplies, credit is restricted to the portion attributable to taxable and zero-rated supplies.

Section 17(3) - Value of exempt supply

The value of exempt supply for the purpose of apportionment is determined as prescribed. The statutory computation includes specified categories such as supplies on which the recipient pays tax under reverse charge, transactions in securities, sale of land and the relevant sale of building. The Act also contains an explanation dealing with activities or transactions specified in Schedule III.

Section 17(4) - Banks, financial institutions and NBFCs

A banking company, financial institution or non-banking financial company engaged in accepting deposits or extending loans or advances may either follow the normal apportionment mechanism under Section 17(2), or exercise the statutory option to avail 50% of eligible ITC each month, subject to the conditions and exceptions in the provision and the applicable rules. The option, once exercised, cannot be withdrawn during the remaining part of that financial year.

Section 17(5): Blocked input tax credit

Section 17(5) overrides the general entitlement under Section 16(1) and Section 18(1) for the specified categories below. The exact statutory conditions and exceptions should be checked before treating a credit as blocked or eligible.

(a) Motor vehicles, vessels and aircraftITC is restricted for specified motor vehicles for transportation of persons having an approved seating capacity of not more than 13 persons, including the driver, except where used for further supply, transportation of passengers or training on driving such vehicles. Credit on vessels and aircraft is similarly subject to statutory exceptions, including further supply, passenger transport, specified training and transportation of goods.

(aa) Insurance, servicing, repair and maintenanceITC on general insurance, servicing, repair and maintenance relating to the motor vehicles, vessels or aircraft covered by clause (a) is blocked, subject to statutory exceptions, including eligible uses and supplies received by manufacturers or insurers in the circumstances specified by the Act.

(b) Food, catering, health, insurance and employee-related benefitsThe clause covers food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing/renting/hiring of specified motor vehicles, vessels or aircraft, life insurance, health insurance, club/health/fitness membership, and employee vacation travel benefits. Credit may remain available where an inward supply is used for an outward taxable supply of the same category or as an element of a taxable composite or mixed supply, and in specified cases where provision by an employer is obligatory under law.

(c) Works contract for construction of immovable propertyITC is blocked on works contract services supplied for construction of an immovable property, other than plant and machinery, except where the inward works contract service is used for further supply of works contract service.

(d) Construction on own accountITC is blocked on goods or services or both received by a taxable person for construction of an immovable property, other than plant and machinery, on the person's own account, including where the construction is used in the course or furtherance of business. For clauses (c) and (d), "construction" includes reconstruction, renovation, additions, alterations or repairs to the extent capitalised to the immovable property.

(e) Composition taxCredit is not available for goods or services or both on which tax has been paid under the composition levy provisions of Section 10.

(f) Non-resident taxable personCredit is blocked on goods or services or both received by a non-resident taxable person, except on goods imported by that person.

(fa) Corporate social responsibility (CSR)Credit is blocked on goods or services or both received by a taxable person which are used or intended to be used for activities relating to obligations under Section 135 of the Companies Act, 2013.

(g) Personal consumptionGoods or services or both used for personal consumption do not qualify for ITC.

(h) Lost, stolen, destroyed, written off, gifts and free samplesITC is blocked for goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

(i) Tax paid under Section 74 for specified past periodsThe current clause blocks ITC on tax paid in accordance with Section 74 in respect of any period up to Financial Year 2023-24. The earlier references to Sections 129 and 130 were removed with effect from 1 November 2024.

Rules 42 and 43: manner of attribution and reversal

Section 17(6) authorises prescription of the manner in which credit under Sections 17(1) and 17(2) is attributed. In practice, Rule 42 of the CGST Rules governs attribution and reversal for inputs and input services, while Rule 43 deals with capital goods in relevant mixed-use situations.

Situation	General treatment
Exclusively non-business use	Credit attributable to non-business use is not eligible.
Exclusively exempt supplies	Credit attributable exclusively to exempt supplies is not eligible.
Exclusively taxable/zero-rated supplies	Eligible credit may be taken subject to the Act and Rules.
Common inputs/input services	Common credit is apportioned under Rule 42.
Common capital goods	Attribution/reversal is determined under Rule 43.

Meaning of "plant and machinery" under Section 17

For Chapter V and Chapter VI, "plant and machinery" means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supplies of goods or services or both, and includes the foundation and structural supports. The statutory definition excludes land, buildings or other civil structures, telecommunication towers and pipelines laid outside factory premises.

Finance Act, 2025 clarification: Section 17(5)(d) now uses "plant and machinery" instead of "plant or machinery", with retrospective effect from 1 July 2017. Explanation 2 further provides, for clause (d), that references to "plant or machinery" are to be construed as "plant and machinery" notwithstanding contrary judgments, decrees or orders.

Practical checklist before claiming ITC under Section 17

First confirm basic eligibility under Section 16. Then identify whether the inward supply is exclusively for business/taxable use, exclusively for non-business/exempt use, or common to both. Separately test the inward supply against every applicable clause of Section 17(5). Where common credit exists, calculate and document the required attribution or reversal under Rules 42 and 43. Construction-related expenditure, employee benefits, motor vehicles, CSR expenditure, gifts/free samples and written-off goods require particular care because their treatment depends on the precise statutory wording and exceptions.

Official GST resources

For the current statutory text, amendment history, notifications and rules, refer to the official Central Board of Indirect Taxes and Customs (CBIC) and GST Council resources linked in the right sidebar. This article is a practical explanatory guide and should be read with the current Act, Rules and applicable notifications.