Input Tax Credit (ITC) is the backbone of GST — it lets a business reduce the tax it pays on sales by the tax it already paid on purchases, avoiding tax-on-tax. But ITC comes with strict conditions.
This guide explains the conditions to claim ITC, credits that are blocked, and situations where ITC must be reversed.
What is Input Tax Credit (ITC) under GST?
ITC is the credit for GST paid on business purchases and expenses, set off against output GST liability. It is claimed in GSTR-3B based on the auto-generated GSTR-2B.
To claim ITC you must hold a valid tax invoice, have received the goods/services, the supplier must have paid the tax and filed their return, and you must have filed your own return.
| Basis for claim | GSTR-2B |
|---|---|
| Key documents | Valid tax invoice / debit note |
| Time limit | By 30 November of the next FY or annual return, whichever is earlier |
| Payment to supplier | Within 180 days, else reverse ITC |
Step-by-step process
- Verify GSTR-2B. Confirm the credit appears in your GSTR-2B for the period.
- Check eligibility. Ensure the purchase is for business, not blocked, and you hold a valid invoice.
- Claim in GSTR-3B. Report eligible ITC in the return.
- Reverse where required. Reverse ITC for non-payment within 180 days, exempt supplies, or blocked credits.
Blocked credits (Section 17(5))
- Motor vehicles (with exceptions) and related expenses
- Food and beverages, outdoor catering, club memberships
- Works contract and construction of immovable property (with exceptions)
- Goods/services used for personal consumption
- Goods lost, stolen, destroyed or given as free samples
Frequently asked questions
Can I claim ITC not shown in GSTR-2B?
Generally no. ITC is limited to credits reflected in your GSTR-2B.
When must ITC be reversed?
If you do not pay the supplier within 180 days, or use inputs for exempt/personal purposes, or the credit is blocked under Section 17(5).