Food, Beverages and Outdoor Catering: Section 17(5)(b)(i)

Food 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 (b)(i) is a list of six things, and it is the clause most businesses touch every month.

Blocked: food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, plus leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clauses (a) and (aa) except when used for the purposes specified therein, and life insurance and health insurance. Two provisos restore credit — the same-category proviso to (b)(i), and the obligatory-under-law proviso that sits at the end of clause (b) and applies to the whole clause.

The list

The clause reads as one long enumeration. Taken apart, it blocks:

1. food and beverages
2. outdoor catering
3. beauty treatment
4. health services
5. cosmetic and plastic surgery
6. leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or (aa), except when used for the purposes specified therein
7. life insurance and health insurance

Items 1 to 5 and item 7 have no internal exceptions. Item 6 carries its own exception, tied to the clause (a) and (aa) permitted uses. Leasing, renting and hiring →

Proviso one: same category outward supply

"Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply."

Two limbs, and both are used in practice.

Same category outward supply. A restaurant buying food to serve food. A caterer buying catering. A hospital buying health services to supply health services. A salon buying beauty products to supply beauty treatment.

The categories must match. A hotel buying food to serve in its restaurant is supplying food — same category. A manufacturer buying food for a staff canteen is not supplying food at all.

Element of a taxable composite or mixed supply. Broader, and more useful. An airline's in-flight meal is an element of the passenger transport supply. A hotel's breakfast included in the room tariff is an element of the accommodation supply. A conference organiser's catering bundled into the delegate fee is an element of the event service.

The condition is that the outward supply must be taxable. Where the outward supply is exempt, the proviso does not save the credit and the ordinary s.17(2) apportionment applies as well.

Proviso two: obligatory under any law

The second proviso sits at the end of clause (b), after sub-clause (iii):

"Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force."

Because of its placement, it applies to the whole of clause (b) — sub-clauses (i), (ii) and (iii).

The classic application is the factory canteen. Section 46 of the Factories Act, 1948 requires a canteen in a factory employing more than 250 workers. Where that obligation applies, credit on the canteen contractor's services is available under this proviso.

Points that decide real cases:

The obligation must be legal, not contractual. An employment contract promising subsidised meals is not "obligatory under any law". A State factory rule requiring it is.

The obligation must bind the employer. A recommendation or a good-practice guideline is not enough.

The scope of credit follows the scope of the obligation. Where the law requires a canteen for 250-plus workers, credit is available for the canteen. Free meals to visitors, or catering for a management offsite, sit outside it.

Employee recoveries. Where a nominal amount is recovered from employees, the recovery itself is generally not taxable under the employment analysis, and the credit position rests on this proviso. Employee recoveries under GST →

The obligatory-under-law proviso in detail →

Common situations

Key takeaways

• Clause (b)(i) blocks food, beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, vehicle hire, and life and health insurance.
• The same-category proviso restores credit where the inward supply feeds a taxable outward supply of the same category, or is an element of a taxable composite or mixed supply.
• The obligatory-under-law proviso applies to all of clause (b), not just sub-clause (iii).
• The obligation must be legal, not contractual.
• Office pantry and client entertainment remain blocked.
• Where the outward supply is exempt, the same-category proviso does not help.

Read next

• The "Obligatory Under Any Law" Proviso
• Leasing, Renting and Hiring of Motor Vehicles
• GST on Employee Recoveries
• 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).