The invoice name is not the use test
Section 17(5)(g) of the CGST Act blocks input tax credit on goods or services used for personal consumption. A company GSTIN, payment with a company card or an employee reimbursement does not prove business use. Establish the actual use and the recipient before testing ordinary eligibility under section 16. A business purpose, where supported, still does not override any other applicable blocked-credit provision.
Read the applicable text: CBIC CGST Act, sections 16 and 17 CBIC CGST Rules, Rules 42 and 43 CBIC Circular 170/02/2022-GST, paragraphs 4.1–4.5.
Separate identifiable personal lines from common use
Identify personal items from invoice descriptions, quantities, usage or delivery records and the underlying expense claim. Where the supplier identifies distinct lines, work from the tax on those lines rather than using an arbitrary ratio. Section 17(1) restricts credit where goods or services are used partly for business and partly otherwise; true common credit requires the applicable attribution under the rules, including Rule 42 or 43 as relevant. Under Rule 42, when common inputs and input services are partly used for non-business purposes, the prescribed non-business component D2 is 5% of common credit C2, after the initial segregation. This is not 5% of every invoice. Apply Rule 43 separately for capital goods.
Review the expense categories that look business-related
A named traveller, director or employee does not by itself establish personal consumption. Check the actual itinerary, delivery location, access records or usage and the business purpose. Conversely a manager's approval cannot turn private expenditure into business credit. Identify independently applicable section 17(5) restrictions, such as specified travel benefits or other categories, without reversing the same tax twice.
Reconcile the permanent block to GSTR-3B
CBIC Circular 170/02/2022-GST explains that section 17(5) blocked credit included in gross Table 4(A) is reported in Table 4(B)(1), so it does not enter net Table 4(C). For a genuinely temporary reversal that may be reclaimed after conditions are met, use Table 4(B)(2); on eligible reclaim, report it in Table 4(A)(5) and disclose it in Table 4(D)(1). Do not move a permanent personal-use block to the reclaim register. When a previous period contained an erroneous claim, identify the actual filed treatment and determine the correction and any interest separately; do not duplicate an earlier reversal.
Retain a tax-head and invoice-level trail
Track invoice, GSTIN, expense owner, factual classification, reason code, tax head, amount already excluded and return period. Reconcile the credit ledger and expense or asset entries. Keep later refunds, supplier corrections and cost recovery from employees in a separate column so a recovery is not mistaken for proof of eligibility.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Separate invoice lines
A vendor invoice carries ₹3,600 GST on otherwise eligible office items and ₹900 on identifiable personal items. If gross Table 4(A) includes ₹4,500 and there are no other adjustments, report ₹900 in Table 4(B)(1) and ₹3,600 net.
Illustrative example 2: Company card used privately
A home-use item charged to a company card has ₹2,700 GST. On the assumed solely personal facts the entire ₹2,700 is blocked and eligible credit is zero.
Illustrative example 3: Two tax heads
Distinct personal invoice lines contain ₹540 CGST and ₹540 SGST. Record ₹540 under each head, totaling ₹1,080; do not move it to IGST.
Illustrative example 4: Purchase with separately identifiable business units
Ten equal-tax units carry ₹6,000 GST; three are established as solely personal and seven are otherwise eligible. Direct attribution gives ₹1,800 blocked and ₹4,200 eligible. This is not a common-credit formula.
Illustrative example 5: Avoid a duplicate reversal
A reconciliation identifies ₹8,500 of personal consumption, of which ₹6,000 was already correctly removed from net credit. The remaining amount to investigate is ₹2,500, not another ₹8,500.
Illustrative example 6: Keep temporary and permanent differences apart
Gross Table 4(A) credit is ₹28,000. Report ₹3,000 in permanent personal-use blocks in Table 4(B)(1) and ₹2,000 of independently established temporary reversals in Table 4(B)(2). Net credit is ₹23,000 on these assumptions; the personal-use amount does not enter the reclaim register.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Obtain the purchase and credit records | Invoice population and GSTIN-wise GSTR-2B |
| 2 | Identify the beneficiary and use | Expense, delivery and usage evidence |
| 3 | Isolate personal invoice lines | Quantity and tax-head detail |
| 4 | Classify business and common use | Documented facts and attribution route |
| 5 | Screen other credit restrictions | Section 16 and remaining section 17 tests |
| 6 | Measure the tax by head | Invoice-linked reconciliation |
| 7 | Compare gross reported amounts | Relevant Table 4(A) and prior filings |
| 8 | Verify permanent block reporting | Table 4(B)(1) support |
| 9 | Check for prior or duplicate action | Return history and electronic credit ledger |
| 10 | Approve outstanding differences | Documented correction or escalation decision |
Sixteen practitioner FAQs
1. Does billing to the company make ITC available?
Verify actual use and applicable law; the name alone is insufficient.
2. Does reimbursement prove personal use?
No. Examine what was bought and how it was used.
3. Is every director expense blocked?
Apply the actual facts and any other applicable restriction.
4. Can a business expense be blocked under another clause?
Yes. Business use alone does not override section 17(5).
5. What if personal items appear on a separate line?
Trace the associated tax to that line where reliable.
6. Can a flat percentage replace Rule 42 or 43?
No. Use the prescribed method for true common credit.
7. Should the tax heads be combined in filing?
Reconcile and report under the correct heads.
8. Does GSTR-2B determine personal use?
No. It is an invoice and credit information source, not proof of use.
9. Which GSTR-3B row is used for a current section 17(5) block included in gross credit?
Circular 170 explains reporting in Table 4(B)(1).
10. Does Table 4(D)(1) capture this as reclaim?
No. The permanent block does not create a reclaim entitlement.
11. What if credit was wrongly claimed previously?
Review actual filings, reversal and interest requirements on the facts.
12. Can two blocked-credit codes apply to one line?
Classify the facts but remove the same amount only once.
13. Does employee recovery restore ITC?
It does not establish eligibility; consider the separate transaction facts.
14. What if there are shared subscriptions?
Determine actual users and whether direct attribution or common-credit rules apply.
15. Should all personal expenses be booked as GST receivables?
Reconcile ledger classification to the reviewed eligibility position.
16. Does this guide determine income-tax deductibility?
No. That requires a separate statutory analysis.
Official sources
CBIC CGST Act, sections 16 and 17 CBIC CGST Rules, Rules 42 and 43 CBIC Circular 170/02/2022-GST, paragraphs 4.1–4.5