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Input tax credit (ITC) under GST: conditions, blocked credits and reconciliation

19 October 2026

Input tax credit (ITC) lets a registered business reduce the GST it pays on sales by the GST it paid on purchases. It is one of the main benefits of GST registration and one of the most common sources of notices. This guide explains the basics.

What is input tax credit?

When you buy goods or services for your business and pay GST on the invoice, that tax can usually be set off against the GST you owe on your sales. A business that sells for 100 plus tax and bought for 60 plus tax pays tax only on the difference. Our guide to GST return filing shows where the credit is claimed.

What are the conditions to claim it?

The main conditions in the law are that:

  • You hold a valid tax invoice, debit note or other prescribed document
  • You have received the goods or services
  • The supplier has actually paid the tax to the government and the details appear in your GSTR-2B
  • You have filed your return, and you claim within the time limit set in the law
  • The purchase is for business use

The exact wording and the time limit are in the GST law and can change, so check them before relying on a claim.

Which credits are blocked?

Some categories of purchases do not qualify even when GST was paid, for example goods or services used for personal consumption and certain items listed in the law, with exceptions. If you claimed credit and later find that it is not allowed, it has to be reversed with interest.

What is GSTR-2B and why does it matter?

GSTR-2B is an auto-generated statement on the GST portal that shows the credit available to you, based on what your suppliers reported in their returns. Matching your purchase records with it is the most important step of the month. If a supplier did not file or reported the wrong amount, the credit may not appear.

How do I reconcile my purchases?

  1. Download GSTR-2B for the month and match it with your purchase register, invoice by invoice.
  2. Mark invoices that appear in both, in one only, or with different amounts or GSTINs.
  3. Ask suppliers to correct or file missing invoices, and hold back credit that is not shown.
  4. Reverse any credit that is not allowed.
  5. Record the result so you can explain it later in your annual return and in any notice.

What happens if I claim more than I should?

Excess or ineligible credit has to be paid back with interest, and the department can send a notice or ask for an explanation. A regular reconciliation is the best protection.

Do I need help with input tax credit?

Reconciling a large number of invoices takes time. Our Experts can match your purchases with GSTR-2B, list the mismatches and prepare the follow-up. See GST ITC reconciliation and GST return filing. The year-end comes together in the GST annual return.

This article is general information, not individual professional advice. Conditions, time limits and blocked categories change, so check the official GST portal or ask our Experts before you act.