The GST Council meets on October 7 with a proposal that could unlock tax credits businesses have been denied for years. Here is what the change means.

Under Section 17(5) of the CGST Act, certain purchases are “blocked credits”: the tax paid on them cannot be claimed back. The Law Committee wants to unblock five categories: employee life and health insurance, outdoor catering, free samples, and goods that are destroyed or written off.

The insurance change matters most. Companies that buy health cover for staff currently pay GST on the premium but cannot claim it. Unblocking it would cut the real cost of employee welfare and end a flood of litigation.

Outdoor catering and free samples affect the food, pharma and FMCG sectors, where the blocked credit inflates costs. Relief on destroyed or written-off goods helps manufacturers who lose stock to damage or expiry.

The Council will also decide on input tax credit for motor vehicles, a bigger-ticket item. No rate changes are expected this time. If approved, the amendments will need Parliament’s nod before they take effect.