What is Input Tax Credit (ITC) under GST

Input Tax Credit is the GST you paid on business purchases, which you can subtract from the GST you collect on sales. You then pay only the difference to the government. ITC stops tax from piling up at each stage of the supply chain, but you can claim it only when specific conditions are met.

Why ITC matters for your business

Say you buy goods for 1,00,000 plus 18,000 GST and sell them for 1,50,000 plus 27,000 GST. You pay 9,000 (27,000 less 18,000), not 27,000. Missing ITC raises your cost directly, which is why registered businesses care about it. Getting it right begins with a valid GST registration.

Conditions to claim ITC

Section 16 of the CGST Act says you must satisfy all of these:

• You hold a tax invoice or debit note from a registered supplier.
• The supplier has reported the invoice in their outward supplies statement.
• You have actually received the goods or services.
• The tax has been paid to the government by the supplier, in cash or through credit.
• You have filed your return under section 39 (GSTR-3B).

There is also a time limit: ITC cannot be claimed after 30 November following the end of the financial year to which the invoice relates, or the date of filing the annual return, whichever is earlier.

How to check and claim it

The GST portal generates GSTR-2B, an auto-drafted, read-only statement of the credit available to you based on your suppliers’ filings. Match it with your purchase books before you claim in GSTR-3B. Regular GST return filing keeps this matching manageable, and a yearly GST audit catches gaps.

Common mistakes

• Claiming credit that does not appear in GSTR-2B without checking why.
• Claiming credit on items the law blocks, such as certain personal or restricted expenses. Check the blocked list in section 17(5) before claiming.
• Paying a supplier who never files returns, so your credit is stuck.
• Missing the 30 November deadline for the previous year’s invoices.
• Ignoring a notice about mismatched credit. A proper GST notice reply should go in on time.

Related guides: GSTR-1 and GSTR-3B, What is GSTIN, HSN and SAC codes

FAQs

Can I claim ITC if my supplier has not filed their return?

Generally no. The invoice must be reported by the supplier and appear in your GSTR-2B, and the tax must have been paid to the government.

What is the last date to claim ITC for an invoice?

30 November following the end of the financial year of the invoice, or the filing of the annual return if that comes first.

Where do I see the credit available to me?

In GSTR-2B on the GST portal. It is auto-drafted and cannot be edited by you.

Want your credit reconciled before the next return? Talk to a Taxhint expert.