SourceLookup fails for dependencies

Setting a breakpoint to a file from a dependency fails on source lookup.

In my gradle project I have dependency to compile group: 'xerces', name: 'xercesImpl', version:'2.11.0 and I am trying to set a breakpoint on 'org.apache.xerces.parsers.DomParser.parse()' which is located on this dependency. I can browse to the file through vscode and see the code but when I try to set the breakpoint it fails with the below stacktrace.

[Error - 12:12:00] 13-Nov-2017 12:10:58 PM DebugSession dispatch exception: java.lang.IllegalStateException: Java Model Exception: Java Model Status [/Users/gercan/.m2/repository/xerces/xercesImpl/2.11.0/xercesImpl-2.11.0.jar is not on its project's build path]
	at org.eclipse.jdt.internal.core.JavaElement.newJavaModelException(JavaElement.java:570)
	at org.eclipse.jdt.internal.core.Openable.generateInfos(Openable.java:247)
	at org.eclipse.jdt.internal.core.Openable.openAncestors(Openable.java:505)
	at org.eclipse.jdt.internal.core.Openable.generateInfos(Openable.java:241)
	at org.eclipse.jdt.internal.core.Openable.openAncestors(Openable.java:505)
	at org.eclipse.jdt.internal.core.Openable.generateInfos(Openable.java:241)
	at org.eclipse.jdt.internal.core.JavaElement.openWhenClosed(JavaElement.java:583)
	at org.eclipse.jdt.internal.core.JavaElement.getElementInfo(JavaElement.java:320)
	at org.eclipse.jdt.internal.core.JavaElement.getElementInfo(JavaElement.java:306)
	at org.eclipse.jdt.internal.core.Openable.getBuffer(Openable.java:285)
	at org.eclipse.jdt.internal.core.AbstractClassFile.getBuffer(AbstractClassFile.java:212)
	at org.eclipse.jdt.internal.core.AbstractClassFile.getSource(AbstractClassFile.java:324)
	at org.eclipse.jdt.core.dom.ASTParser.internalCreateAST(ASTParser.java:1131)
	at org.eclipse.jdt.core.dom.ASTParser.createAST(ASTParser.java:815)
	at com.microsoft.java.debug.plugin.internal.JdtSourceLookUpProvider.getFullyQualifiedName(JdtSourceLookUpProvider.java:140)
	at com.microsoft.java.debug.core.adapter.handler.SetBreakpointsRequestHandler.convertClientBreakpointsToDebugger(SetBreakpointsRequestHandler.java:119)
	at com.microsoft.java.debug.core.adapter.handler.SetBreakpointsRequestHandler.handle(SetBreakpointsRequestHandler.java:83)
	at com.microsoft.java.debug.core.adapter.DebugAdapter.dispatchRequest(DebugAdapter.java:80)
	at com.microsoft.java.debug.core.adapter.ProtocolServer.dispatchRequest(ProtocolServer.java:66)
	at com.microsoft.java.debug.core.protocol.AbstractProtocolServer.processData(AbstractProtocolServer.java:166)
	at com.microsoft.java.debug.core.protocol.AbstractProtocolServer.start(AbstractProtocolServer.java:80)
	at com.microsoft.java.debug.core.adapter.ProtocolServer.start(ProtocolServer.java:53)
	at com.microsoft.java.debug.plugin.internal.JavaDebugServer$2.run(JavaDebugServer.java:136)
	at java.util.concurrent.Executors$RunnableAdapter.call(Executors.java:511)
	at java.util.concurrent.FutureTask.run(FutureTask.java:266)
	at java.util.concurrent.ThreadPoolExecutor.runWorker(ThreadPoolExecutor.java:1142)
	at java.util.concurrent.ThreadPoolExecutor$Worker.run(ThreadPoolExecutor.java:617)
	at java.lang.Thread.run(Thread.java:745