Not every business expense qualifies for Input Tax Credit (ITC). The GST law clearly lists certain blocked credits — meaning you cannot claim ITC even if GST is paid on those goods or services.

Understanding these restrictions helps businesses avoid wrongful ITC claims that could attract penalties and notices.

10 Common Expenses Where ITC is Not Allowed

1️⃣ Motor Vehicles for Personal or Non-Eligible Use

ITC is not allowed on cars, bikes, or other vehicles unless they are used for:

• Transport of goods,

• Passenger transport (e.g., taxis), or

• Driver training.

2️⃣ Food, Beverages, and Catering

If you provide meals or catering to employees or clients, ITC is not claimable, unless it’s mandatory under law (e.g., canteen for factory workers).

3️⃣ Memberships and Club Fees

ITC cannot be claimed for gym memberships, club subscriptions, or similar leisure facilities.

4️⃣ Beauty, Health, or Cosmetic Treatments

Medical or beauty services, even for staff, are not eligible for ITC unless part of a taxable outward supply (like a salon).

5️⃣ Rent-a-Cab, Insurance, and Travel Benefits

ITC is disallowed on:

• Rent-a-cab services,

• Health/life insurance, and

• Travel benefits extended to employees.
  Exceptions exist if these are required by law or part of your service package.

6️⃣ Personal or Non-Business Expenses

Any goods or services used for personal consumption or non-business purposes are ineligible.

7️⃣ Works Contract Services for Immovable Property

If you’re constructing or renovating an office building, ITC on works contracts or materials used is not allowed (except for further supply of such service).

8️⃣ Goods Lost, Stolen, or Damaged

No ITC can be claimed on lost, destroyed, written-off, or disposed inventory.

9️⃣ Free Samples or Gifts

When goods are distributed as gifts or free samples, ITC on those items must be reversed.

🔟 Composition Scheme Purchases

If you purchase from a composition dealer, no ITC can be claimed since composition suppliers cannot charge tax on invoices.

Blocked credits are meant to prevent misuse of ITC. Businesses should review these restrictions regularly to stay compliant and ensure claims are legitimate.

Continue reading:
GST for E-commerce Sellers (Amazon, Flipkart, etc.)
Complete Guide to Input Tax Credit (ITC) under GST
GST for Home Bakers & Cloud Kitchens (2025 Guide)
How to Apply for GST Refunds & Track Application Status
ITC Not Allowed? 10 Expenses You Can’t Claim Credit For (2025 Update)
Common GST Filing Mistakes Small Businesses Make (and How to Fix Them)