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GST Council May Unblock ITC on Employee Insurance, Catering, Free Samples & Expired Stock

The GST Council's Law Committee has recommended five amendments to Section 17(5) to unblock input tax credit on employee life/health insurance, outdoor catering, free samples and written-off goods — to be considered on 7 October. Motor vehicles remain unresolved. Here's what's proposed and how to prepare.

Mohan—·6 min read
Meeting
GST Council, 7 October 2026
Provision
Section 17(5), CGST Act
On the table
5 ITC-unblocking changes
Status
Law Committee proposal

The short version

  • The GST Council's Law Committee has recommended five amendments to Section 17(5) — the "blocked credit" provision — to unblock input tax credit (ITC) on several common business expenses.
  • In line for relief: employee life & health insurance, outdoor catering, free samples, and goods destroyed or written off (e.g. expired stock).
  • Motor vehicles (and their leasing/renting/hiring) are the sticking point — no consensus in the Committee over misuse risk, so it's left to the Council to decide.
  • These are proposals for the 7 October meeting, not law yet. If cleared, they'd cut a long-standing cost for businesses by restoring credit on genuine business spends.

Section 17(5) is the part of GST that quietly costs businesses money — it "blocks" credit on a list of expenses even when they're incurred for business. The GST Council may finally loosen several of those blocks at its 7 October meeting. Here's what's proposed, and who stands to gain.

What's being proposed

The Law Committee has recommended omitting or narrowing several entries in Section 17(5) so that credit flows on expenses that are, in substance, normal business costs. Five changes are expected to go before the Council:

  1. Employee life & health insurance

    Particularly group policies companies provide to staff. With life and health insurance now out of the tax net, denying credit on group cover — a genuine business expense — creates an inconsistency the change would fix.

  2. Outdoor catering

    Catering for business events, conferences and staff functions can be a real business cost. Credit is already allowed where providing it is obligatory under law; the proposal widens that, while credit stays blocked for personal or non-business use.

  3. Free samples

    Distributing free samples is routine market-development activity in pharma, FMCG and similar sectors. Blocking credit simply adds to the cost of doing business — so the block may be removed.

  4. Goods destroyed or written off

    Where goods are destroyed or written off because their shelf life has expired — often as required for legal compliance — credit may no longer be denied.

  5. Motor vehicles — left to the Council

    Unblocking ITC on motor vehicles and their leasing/renting/hiring is the unresolved one. The Committee couldn't agree, so the decision is left to the Council (more below).

Why these matter

Each of these is a cost that businesses already bear but can't recover credit on — so the GST paid sticks as a dead expense. Restoring credit on employee insurance and canteen/catering is significant for large employers, for whom these have become standard operational necessities rather than perks. For pharma and FMCG, free-sample credit directly affects go-to-market cost. And allowing credit on expired or legally-destroyed stock removes a penalty on compliance itself.

The logic running through all five

The common thread is alignment with how business actually works: credit should follow genuine business expenditure, and shouldn't be denied just because the expense happens to sit on a legacy "blocked" list. Where an expense is personal or non-business, the block is intended to stay — so the relief is targeted, not a free-for-all.

The one without consensus: motor vehicles

Motor vehicles are where the Committee split. Some members worried that unblocking credit on vehicles — and on leasing, renting or hiring them — could be misused, with vehicles meant for personal use routed through a business to claim credit, carrying major revenue implications. There was also a suggestion to allow relief for vehicles alone (not the leasing/renting/hiring leg). With no agreement, the matter has been left for the Council to decide on 7 October.

These are proposals — not yet law

Everything here is a Law Committee recommendation that the GST Council may consider on 7 October. Nothing changes until the Council approves it and the amendments to Section 17(5) are notified. Don't start claiming this credit yet — plan for it, but act only once the change is officially in force, with its effective date.

What businesses should do now

  • Map your blocked credit. Total up the GST you're currently writing off on employee insurance, catering/canteen, free samples and expired-stock write-offs — that's your potential upside.
  • Keep the documentation ready. Clean records showing these are business expenses (policies, event invoices, sample dispatch records, destruction/write-off certificates) will matter if credit opens up.
  • Watch the 7 October outcome and, crucially, the effective date and wording of any notified amendment before changing your ITC position.
  • Hold on motor-vehicle credit — that one may not move, or may be limited; don't assume it.

Want to be ready if ITC opens up?

efiletax helps you identify blocked credit, keep the right documentation, and claim correctly the moment the law changes.

Talk to our GST team

Disclaimer: This article describes proposals expected to be considered at the GST Council meeting on 7 October 2026 and is current as at the date of publication. These are recommendations, not enacted law; any change takes effect only when approved by the Council and notified. This is not legal or tax advice — please verify the final position or talk to efiletax before acting.

#GST#Input Tax Credit#Section 17(5)#Blocked Credit#GST Council#Employee Insurance#Outdoor Catering#Free Samples#Motor Vehicles#Business Expenses