Input tax credit (ITC) under GST: conditions and limits
Input tax credit lets a GST-registered business offset GST paid on purchases against GST on sales, if invoice, receipt and GSTR-2B conditions are met.
Short answer
Input tax credit (ITC) is the GST a registered business pays on its purchases of goods and services used in the course of business, which it can set off against the GST it collects on its own sales. Section 16 of the CGST Act, 2017 sets the conditions.
- Governed by
- Sections 16 to 18, CGST Act 2017
- Time limit
- 30 November after the year end, or annual return date if earlier
- Payment rule
- Reverse ITC if supplier not paid within 180 days
- Blocked credits
- Section 17(5)
Conditions to claim ITC
Credit is allowed only when all of the following conditions are met. Under section 155 of the CGST Act, the burden of proving eligibility for input tax credit lies on the business claiming it.
- You hold a tax invoice or debit note
- You have received the goods or services
- The supplier has furnished the invoice in GSTR-1 and it appears in your GSTR-2B
- The tax has actually been paid to the government
- You have filed your GSTR-3B return
- You pay the supplier within 180 days of the invoice date
Blocked and reversed credits
Section 17(5) blocks credit on certain items, such as most motor vehicles for personal transport, food and beverages, club memberships, works contracts for construction of immovable property, goods for personal consumption, and goods lost, stolen or given as gifts. Credit must also be apportioned and reversed where purchases are used partly for exempt supplies or non-business purposes. ITC for a financial year cannot be claimed after 30 November of the following year or the date of filing the annual return, whichever is earlier.
Why it matters for startups
ITC directly affects cash flow and pricing, because unclaimed credit becomes a cost. Reconcile purchases with GSTR-2B every month, chase vendors who have not uploaded invoices, and pay suppliers within 180 days. Exporters and businesses with zero-rated supplies can seek refunds of accumulated ITC instead of carrying it forward.
Related services
Sources
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Can I claim ITC if my supplier has not filed GSTR-1?
Generally no. ITC is restricted to invoices reflected in your GSTR-2B, which depends on the supplier's GSTR-1.
Is ITC available on office rent?
Yes, if the landlord charges GST and the premises are used for business, subject to the other conditions.
What happens to ITC on a car bought for the business?
Credit on motor vehicles for transporting persons is generally blocked, with exceptions such as vehicles used for further supply or training.