A common mistake in GST filing is claiming credit for every invoice that shows up in GSTR-2B. The portal auto-populates your supplier invoices, but it is your responsibility to filter out the ineligible ITC before you file GSTR-3B. Claiming ineligible credit results in notices and an 18% interest penalty.
What makes ITC ineligible?
There are two main reasons an invoice carries ineligible ITC under the CGST Act.
- Blocked by law: Section 17(5) lists specific goods and services where credit is strictly blocked, even if they are used for your business.
- Missing conditions: Section 16 lists the rules you must follow to claim credit. If you fail any rule, the ITC becomes ineligible.
The Section 17(5) blocked credit list
You cannot claim ITC on these items. If they appear in your GSTR-2B, you must exclude them from your eligible claim.
- Motor vehicles: Cars with a seating capacity of up to 13 persons, unless you use them to supply transport services or run a driving school.
- Vehicle expenses: Insurance, servicing, and repairs for those blocked motor vehicles.
- Employee benefits: Life insurance, health insurance, and travel benefits like home travel concessions, unless a specific law forces you to provide them.
- Food and wellness: Food, beverages, outdoor catering, beauty treatments, health services, plastic surgery, and club or fitness centre memberships.
- Construction: Works contract services and purchases used to construct immovable property on your own account, except for plant and machinery.
- CSR activities: Purchases made to fulfil Corporate Social Responsibility obligations.
- Personal use: Any goods or services used for personal consumption.
- Lost or free goods: Goods that are lost, stolen, destroyed, written off, or given away as gifts or free samples.
Claiming blocked credit: If you claim blocked ITC and utilise it, you will have to pay it back with interest at 18% per annum under Section 50.
Ineligible ITC due to Section 16 conditions
Even if an item is not on the blocked list, the ITC is ineligible if you do not meet the rules in Section 16. The credit is denied if:
- Not in GSTR-2B: The supplier did not file their GSTR-1, so the invoice details have not been communicated to you in GSTR-2B.
- No valid invoice: You do not possess the actual tax invoice.
- Goods not received: The invoice is generated but you have not yet received the goods or services.
- Time limit crossed: You try to claim it after the 30th of November following the end of the financial year.
Worked example for ineligible ITC
A business makes four purchases in a month. Here is how they are treated.
| Purchase | In books | In GSTR-2B | Result |
|---|---|---|---|
| New office laptops | ₹25,000 | ₹25,000 | Eligible |
| Staff lunch | ₹1,200 | ₹1,200 | Ineligible (Blocked by 17(5)) |
| Car repair bill | ₹6,500 | ₹6,500 | Ineligible (Blocked by 17(5)) |
| Consulting fee | ₹18,000 | Not in 2B | Ineligible (Not in 2B yet) |
In this example, only the ₹25,000 for laptops can be claimed. The restaurant and repair bills must be marked as ineligible. The consulting fee cannot be claimed until the supplier files their return and it appears in GSTR-2B.
Sort your eligible and ineligible invoices
Finding ineligible ITC manually takes hours. Our tool compares your purchase register with GSTR-2B instantly so you know exactly what to claim. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 10 October 2026. Sources: CGST Act Section 17, CGST Act Section 16.