GST explained
Input Tax Credit Under GST: The Conditions, Blocked Credits and Time Limit
Input tax credit is the GST you paid on purchases, set off against the GST you collect on sales. It is what makes GST a tax on value added rather than on every step. But credit is not automatic: Section 16 sets conditions, Section 17 blocks some credits entirely, and a deadline cuts off claims for the year.
Key takeaways
- You need a valid tax invoice, the goods or services received, the invoice in your GSTR-2B, the supplier’s tax paid and your own return filed.
- Pay your supplier within 180 days of the invoice date, or reverse the credit until you do.
- Some credits are blocked outright: most motor vehicles, food and beverages, club memberships, personal use and goods lost or given away.
- Claim by 30 November after the end of the financial year, or the date you file the annual return if earlier.
The conditions in Section 16
- 1You hold a tax invoice, debit note or other prescribed document from a registered supplier.
- 2You have received the goods or services (goods delivered to someone else on your direction count).
- 3The invoice appears in your GSTR-2B — that is, the supplier has reported it in their GSTR-1.
- 4The supplier has actually paid the tax to the government.
- 5You have filed your own GSTR-3B.
Goods received in instalments: credit is available only when the last instalment arrives.
Why GSTR-2B decides your credit
GSTR-2B is a monthly statement generated from your suppliers’ GSTR-1 filings. Credit you claim in GSTR-3B is compared with it. If a supplier files late or makes an error, the invoice does not appear in your 2B and the credit cannot be taken in that month.
Reconcile every month: match your purchase register against GSTR-2B, chase suppliers whose invoices are missing, and claim only what appears.
TripleBill reconciles your supplier bills against an uploaded GSTR-2B and lists what is matched, what is missing in 2B and what is in 2B but not in your books.
The 180-day payment rule
If you do not pay the supplier — value plus tax — within 180 days of the invoice date, the credit taken must be added back to your output tax, with interest. Once you pay, you can claim it again.
Blocked credits under Section 17(5)
| Blocked | Common exceptions |
|---|---|
| Motor vehicles for carrying people (up to 13 seats) | When used to supply vehicles, carry passengers, or train drivers |
| Food, beverages, outdoor catering, beauty treatment, health services | When used to supply the same service, or required by law for employees |
| Club, health and fitness memberships | — |
| Travel benefits to employees on vacation | When required by law |
| Works contract and construction of immovable property | Plant and machinery |
| Goods for personal consumption, lost, stolen, destroyed or given as free samples or gifts | — |
| Tax paid under the composition scheme or on detection of evasion | — |
Time limit to claim
Credit for an invoice of a financial year can be claimed up to 30 November of the following year, or the date of filing the annual return for that year, whichever is earlier. An invoice from March 2026 must be claimed by 30 November 2026.
Using credit: the order of set-off
- IGST credit is used first against IGST, then against CGST and SGST.
- CGST credit is used against CGST and then IGST — never against SGST.
- SGST credit is used against SGST and then IGST — never against CGST.
Frequently asked questions
Can I claim ITC if my supplier has not filed GSTR-1?
No. The invoice must appear in your GSTR-2B, which comes from the supplier’s GSTR-1.
Can a restaurant claim ITC?
A standalone restaurant charging 5% GST cannot claim input tax credit. Restaurants charging 18% with credit fall under different rules; check your category with your CA.
Is ITC available on a car bought for the business?
Generally no, for passenger vehicles up to 13 seats, unless you are in the business of selling cars, transporting passengers or training drivers.
What happens if I claim ITC wrongly?
It must be reversed with interest, and a penalty may apply if the claim was deliberate.
About the author
Written by the TripleBill team, the people who build the billing and accounting software this site is about. We check competitor prices on their own websites on the date shown above, and we say so when our product is the weaker choice. This article is general information, not tax advice.
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