GST Input Tax Credit Restrictions: Understanding Section 17(5)
Under GST, the Input Tax Credit (ITC) mechanism enables businesses to offset taxes paid on inputs against output liability, ensuring seamless tax flow and working capital efficiency. However, to prevent misuse, Section 17(5) of the CGST Act, 2017 outlines cases where ITC is blocked—termed as "Blocked Credit." These disallowances apply even when purchases are for business use. Blocked credit provisions serve as safeguards against revenue leakage and ensure the correct application of ITC. Understanding these restrictions is crucial for registered taxpayers to remain compliant and optimize tax benefits.
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