What is input tax credit (ITC)?
Reviewed by Ranga & Company
ITC: Input tax credit (ITC) lets a GST-registered business subtract the GST it paid on purchases from the GST it collects on sales, so tax is paid only on the value it adds.
At a glance
- Law
- Sections 16–18 of the CGST Act
- Key condition
- The invoice must appear in your GSTR-2B
- Time limit
- 30 November after the financial year, or the annual return date if earlier
- Blocked credits
- Section 17(5): most motor vehicles, food, club memberships, personal use
- Order of use
- IGST credit first, then CGST and SGST
Conditions to claim ITC
- You hold a tax invoice or debit note from a registered supplier
- You have received the goods or services
- The supplier has reported the invoice, so it appears in your GSTR-2B
- The supplier has actually paid the tax
- You pay the supplier within 180 days, or reverse the credit until you do
Credit you cannot claim
- Motor vehicles for carrying people (with exceptions such as for transport businesses)
- Food and beverages, outdoor catering, beauty treatment, health services
- Club and gym memberships, travel benefits to employees
- Goods or services for personal use, or lost, stolen or given as free samples
- Construction of immovable property on your own account
Common mistakes
- Claiming ITC from your purchase register when the invoice isn't in GSTR-2B
- Claiming credit on blocked items such as staff food or cars
- Not reversing credit when a supplier isn't paid within 180 days
Frequently asked questions
Why can't I claim ITC that is in my books?
The most common reason is that the supplier hasn't reported the invoice, so it isn't in your GSTR-2B. Follow up with the supplier before claiming.
Can composition dealers claim ITC?
No. Businesses under the composition scheme pay tax at a flat rate on turnover and cannot claim input tax credit.
What is the last date to claim ITC for FY 2025-26?
30 November 2026, or the date you file the FY 2025-26 annual return if that is earlier.
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