Input Tax Credit (ITC): How to Claim It Safely

The conditions to claim ITC (Section 16)

1. You have a valid tax invoice or debit note from a registered supplier, with your correct GSTIN on it.
2. You have received the goods or services. For goods received in lots, credit comes with the last lot.
3. The invoice appears in your GSTR-2B, which means the supplier reported it in their GSTR-1, and the supplier has actually paid the tax.
4. You have filed your own GSTR-3B for the period.

Blocked credits: where ITC is not allowed

Section 17(5) of the CGST Act blocks credit on some purchases even when the bill is correct. Common ones for shops:

• Motor vehicles for carrying people (with up to 13 seats), except when you are in the business of selling, transporting or training with them.
• Food and beverages, outdoor catering, beauty treatment, health services and club membership, unless you supply the same service onward.
• Construction of your own building or shop (works contract and goods for immovable property), except plant and machinery.
• Goods lost, stolen, destroyed, written off or given as free samples or gifts.
• Tax paid under the composition scheme (composition dealers cannot charge or pass on GST).

Time limit and the 180-day rule

• ITC for an invoice of a financial year can be claimed up to 30 November of the next financial year, or the date you file the annual return, whichever is earlier.
• If you do not pay the supplier (value plus tax) within 180 days of the invoice date, you must reverse the ITC with interest. You can re-claim it when you pay.
• If a supplier issues a credit note to you (for a return or discount), reduce your ITC accordingly.

A monthly routine for safe ITC

1. Enter every purchase bill as soon as it arrives, with the supplier GSTIN, invoice number and tax split. Keep the paper or PDF.
2. After the 14th, download GSTR-2B from the GST portal for the previous month.
3. Match it with your purchases. Claim what matches. For bills missing in 2B, call the supplier and ask them to report it in their next GSTR-1.
4. Check the purchase list for blocked items and personal expenses and keep them out of the claim.
5. Look at unpaid supplier bills older than 150 days, and plan payment before day 180.

How BizBahi helps

Purchases entered in BizBahi (Purchases → New purchase, or by scanning a supplier bill) keep the supplier GSTIN, invoice number and tax, and the GSTR-3B summary uses them to show your ITC. With More → GSTR-2B matching (paid plans and the 7-day trial) you import the GSTR-2B JSON or Excel from the portal; BizBahi matches it with your purchase bills by supplier GSTIN and invoice number and lists matched, different and missing bills. It does not change your entries or file anything.

Supplier balances in the khata show who is still unpaid, which helps with the 180-day rule. For a related topic on returns from buyers, see the credit note guide.

Can I claim ITC if the supplier has not filed GSTR-1?

Not until the invoice appears in your GSTR-2B. Ask the supplier to report it; you can claim it in the month it appears, within the time limit.

Is ITC available on a mobile phone or laptop bought for the shop?

Yes, if it is used for business, billed to your GSTIN and the other conditions are met. It is not available if it is for personal use.

Can a composition dealer claim ITC?

No. Composition dealers cannot claim input tax credit and cannot charge GST on their bills.

What happens if I claim wrong ITC?

You must reverse it with interest at the applicable rate, and a penalty may apply. Correct it in the next GSTR-3B as soon as you find it.