Section 17(5)(aa): Vessels and Aircraft

Section 17 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Clause (a) applies a size threshold to motor vehicles. Clause (aa) applies none to vessels and aircraft — every one of them is blocked unless the use falls into a permitted category.

Credit on vessels and aircraft is blocked except when used (i) for making the following taxable supplies — (A) further supply of such vessels or aircraft, (B) transportation of passengers, (C) imparting training on navigating such vessels, or (D) imparting training on flying such aircraft; or (ii) for transportation of goods. Note the structure: limb (ii) — transportation of goods — is not qualified by "for making taxable supplies", which is the widest gateway in the clause.

The structure, and why limb (ii) matters

The clause splits into two limbs.

Limb (i) lists four uses, all prefaced by "for making the following taxable supplies". So the vessel or aircraft must be used to make an outward taxable supply of that description.

Limb (ii) simply says "for transportation of goods". There is no requirement that the transportation be an outward supply.

That drafting difference is significant. A manufacturer that owns a vessel and uses it to move its own raw materials is using it for transportation of goods. It is not supplying transport services to anyone. On limb (ii)'s wording, the credit is available.

Compare a company aircraft used to fly its own executives: that is transportation of persons, not goods, and limb (i)(B) requires an outward taxable supply of passenger transport. Blocked.

The five permitted uses

(i)(A) Further supply of such vessels or aircraft. A dealer or trader in vessels or aircraft.

(i)(B) Transportation of passengers. An airline, a ferry operator, a cruise operator.

(i)(C) Imparting training on navigating such vessels. A maritime training institute.

(i)(D) Imparting training on flying such aircraft. A flying school.

(ii) Transportation of goods. A cargo airline, a shipping line, and — on the drafting — an owner moving its own goods.

Definitions

"Vessel" is not defined in the CGST Act. Section 2(z) of the Major Port Authorities Act, 2021 and s.3(55) of the Merchant Shipping Act, 1958 both define it broadly as including anything made for the conveyance, mainly by water, of human beings or of goods.

"Aircraft" likewise takes its ordinary meaning, informed by s.2(1) of the Aircraft Act, 1934.

Neither term is limited by size, tonnage or capacity. A yacht is a vessel. A helicopter is an aircraft.

Where it bites

Corporate aircraft and helicopters. Used to move the company's own personnel — blocked. There is no exception for business use, and the clause overrides s.16(1).

Yachts and pleasure craft. Blocked, and separately at the 40% demerit rate under GST 2.0. The 40% demerit rate →

Chartered aircraft for executive travel. The charter is a service, and its treatment runs through clause (b)(i) — leasing, renting or hiring of aircraft referred to in clause (aa) — rather than clause (aa) itself. Blocked unless the aircraft is used for a clause (aa) purpose.

Offshore support vessels. Used to move goods and personnel to an offshore installation. The goods limb supports credit; a vessel used predominantly for personnel movement is harder.

Dredgers and construction vessels. Not used for transportation of persons or goods at all, and not making any of the listed supplies. On a strict reading they fall in the blocked category, which is an odd result and a live area of dispute.

The knock-on clauses

Clause (ab) blocks general insurance, servicing, repair and maintenance relating to vessels or aircraft referred to in clause (aa) — with a proviso restoring credit where the vessel or aircraft is used for a permitted purpose, and where the recipient manufactures such vessels or aircraft or insures them. Section 17(5)(ab) →

Clause (b)(i) blocks leasing, renting or hiring of vessels and aircraft referred to in clause (aa), except when used for the purposes specified therein. Leasing, renting and hiring →

So a blocked aircraft blocks its insurance, its maintenance and its charter. An aircraft that qualifies under clause (aa) unblocks all three.

Key takeaways

• No size or capacity threshold — every vessel and aircraft is within the clause.
• Five permitted uses: further supply, passenger transport, navigation training, flying training, and transportation of goods.
• Limb (ii) is not qualified by "for making taxable supplies" — self-use for moving goods is arguable.
• Corporate aircraft for executive travel is blocked.
• Clauses (ab) and (b)(i) follow the clause (aa) status of the asset.
• Yachts are additionally at the 40% demerit rate.

Read next

• Section 17(5)(a): Motor Vehicles and the Thirteen-Seat Test
• Section 17(5)(ab): Insurance, Servicing and Repair
• Leasing, Renting and Hiring of Motor Vehicles
• Blocked ITC Under Section 17(5)

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Blocked Credit under GST (November 2025).