Regulatory & Tax

ITC (Input Tax Credit)

Credit you can claim for GST already paid on business purchases — reduces what you owe in GST.

Every business purchase you make includes GST. ITC is the mechanism to claim that back so you only pay net GST (output tax minus input tax credit). Without ITC, GST would be cumulative across the supply chain — the whole point is to tax only the value-add at each stage.

To claim ITC, four conditions must be met: you must have a tax invoice from a registered supplier, you must have received the goods/services, your supplier must have filed and paid GST in their return (this shows up in your GSTR-2B), and you must use the input for business (not personal).

ITC mismatch is the #1 GST notice trigger. If you claim ITC in 3B that doesn't appear in 2B (your supplier didn't file), the system flags it within 60 days.

India context

Reconciling 2A/2B with your purchase register monthly is the single biggest GST compliance task for Indian SMBs. Tools like Tally, Zoho Books, ClearTax automate this; manual reconciliation is the path to ITC mismatch notices.

Examples

  • You buy ₹1L worth of inventory at 18% GST = ₹18,000 ITC. You sell ₹2L worth at 18% = ₹36,000 output tax. Net GST payable: ₹18,000.
  • You can't claim ITC on personal purchases — even if GSTIN is on the invoice.

FAQ

What's the time limit for claiming ITC?

Earlier of: 30th November of the year following the financial year, or filing of annual return for that FY. So FY25-26 ITC must be claimed by Nov 2026 or annual return, whichever comes first.

Can I claim ITC on capital goods?

Yes — entire ITC is available in the month of purchase, no proportionate spreading. Different from older VAT rules.

What about ITC on blocked items?

Section 17(5) blocks ITC on certain categories: motor vehicles for non-business, food/beverage, club memberships, employee personal-use travel, etc. Check before claiming.

Related concepts

GSTGSTR-2AGSTR-2BGSTR-3Btax invoiceplace of supply

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Related glossary entries

GSTIN — Goods and Services Tax Identification Number — a 15-character ID assigned to every GST-registered business in India.GSTR-1 — Monthly (or quarterly) statement of outward supplies — every B2B and B2C invoice your business issued in the period.GSTR-3B — Monthly self-declared summary of all outward and inward supplies and tax liability — the form you actually pay GST against.Place of Supply (GST) — GST rule that determines which state/UT gets the tax on a transaction — drives whether CGST+SGST or IGST applies.

More in Regulatory & Tax

DPDP ActGSTINGSTR-1GSTR-3BRCM (Reverse Charge Mechanism)RERAFSSAIHSN Code
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