Input Tax Credit (ITC) Under GST: A Practical Guide for Buyers
Input tax credit lets you offset GST paid on purchases against GST you owe on sales, but only if you hold a valid tax invoice, have received the goods or services, your supplier has filed and paid the tax, and you claim in time: by 30 November after the financial year or the annual return date, whichever is earlier.
Input tax credit, or ITC, lets a registered business offset the GST it paid on purchases against the GST it owes on sales. It is not automatic. Credit depends on conditions, and missing one can lose it.
The conditions to meet
- ✓You hold a valid tax invoice or debit note from a registered supplier.
- ✓You received the goods or services. Credit cannot be claimed on something not yet delivered.
- ✓The supplier has paid the tax to the government and filed their return. This is why your credit depends on someone else's behaviour.
- ✓You have filed your own return.
- ✓You claim in time. Generally by 30 November following the end of the financial year, or the date you file the annual return, whichever is earlier.
How credit is checked
Your suppliers report their sales in their GSTR-1, and the system builds an auto-drafted statement for you, known as GSTR-2B. You should claim credit that appears there. If an invoice is missing from it, find out why before you claim.
Credit that is blocked
Some purchases do not qualify even with a valid invoice. Typical examples include goods or services for personal use, certain motor vehicles, food and beverages and club memberships, with exceptions. The list is in the law, so check it for your case.
Payment to the supplier
If you do not pay a supplier within 180 days of the invoice date, you generally have to reverse the credit and pay interest, and you can claim it again once you pay.
What to do each month
- Download your auto-drafted statement after the cut-off date.
- Match it to your purchase ledger, invoice by invoice.
- Investigate invoices that appear in one place and not the other.
- Claim only what you can support.
- Follow up with suppliers who have not filed.
Why vendors matter
A cheaper quote is worth less if the GST charged on it cannot be claimed back. Many finance teams now check a vendor's filing history during onboarding, and flag those who file late or not at all.
Keep documents
Hold the invoice, proof of receipt and payment records for each credit claim. In an audit you will be asked for them.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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