The Institute of Chartered Accountants of India (ICAI) has issued the handbook on blocked credit under GST.
Amid growing complexities in Goods and Services Tax (GST) compliance, the Institute of Chartered Accountants of India (ICAI) has released the revised “Handbook on Blocked Credit under GST – November (2nd) 2025 Edition”, offering practitioners updated guidance on one of the most litigated areas under the indirect tax regime.
The new edition, meticulously updated till 10 November 2025, provides clarity on the circumstances where Input Tax Credit (ITC) is disallowed under Section 17(5) of the CGST Act. The publication comes at a time when tax authorities have intensified scrutiny on ineligible credits, especially those linked to non-payment to vendors, mismatch of GSTR-2B vs GSTR-3B, and transactions flagged under risk parameters introduced in recent GST amendments.
A Key Resource for Tax Professionals
In his foreword, ICAI President CA Charanjot Singh Nanda underlined that blocked credits remain one of the most misunderstood and litigation-prone components of GST law. The updated handbook provides a structured analysis of ITC restrictions, apportionment rules, and judicial precedents that shape the practical application of these provisions.
The publication also highlights critical recent developments, including:
- Amendments to Sections 16(2)(aa), 16(2)(ba), 38 impacting eligibility of ITC
- New conditions related to supplier compliance, including default in tax payment
- Clarifications regarding deemed receipt of goods under EXW (Ex-Works) contracts
- Treatment of ITC pertaining to capital goods, works contracts, and employer-employee supplies
- Impact of revocation of cancelled registrations on past ITC claims
- Applicability of newly operational Section 16(5) offering a one-time amnesty window for earlier years
Addressing Widespread Litigation
Blocked credit has emerged as one of the leading sources of GST disputes. Industry bodies have frequently raised concerns about:
- ITC reversals due to vendor non-compliance
- Restrictions on credits for motor vehicles, food & beverages, health services, works contracts
- Classification challenges between business use vs personal use
- Time limits imposed under Section 16(4) for availing missed credits
Courts across the country have issued significant rulings on these issues, making up-to-date guidance essential for taxpayers.
A Practical, Case-Backed Compilation
Prepared by subject matter experts, the handbook covers:
- Meaning and scope of input tax and ITC
- Eligibility conditions under Section 16
- Blocked credits under Section 17(5) with illustrations
- ITC on insurance, repairs, construction activities, and free samples
- Judicial interpretations from Supreme Court and various High Courts
- Common errors noticed by the GST department
- Best practices for defending ITC claims during audits and investigations
The publication is aimed not only at chartered accountants but also tax managers, compliance officers, and businesses seeking to avoid inadvertent violations.
Released Amid Tightening Enforcement
The release is timely, as GST authorities have expanded automated scrutiny through:
- AI-driven mismatch notices
- Risk-based ITC restrictions under new Section 38
- Real-time vendor rating systems
- Mandatory reconciliation for high-value taxpayers
Experts believe the updated handbook will assist businesses in strengthening internal controls, documenting vendor verification, and minimizing exposure to penalties.
