Input Tax Credit (ITC) lets a GST-registered business set off the GST paid on business purchases against the GST it collects on sales. To claim it under Section 16 of the CGST Act you need a valid tax invoice, you must have received the goods or services, the tax must actually be paid to the government, the credit must appear in your GSTR-2B, and you must file your GSTR-3B. Pay the supplier within 180 days or reverse the credit, and claim each year's ITC by the earlier of 30 November of the next financial year or the date you file GSTR-9.
The GST 2.0 rate rationalisation (effective 22 September 2025) moved most goods and services to a two-slab 5% / 18% structure with a 40% demerit rate, but it did not alter the Section 16 / 17(5) ITC framework. The conditions, the GSTR-2B match and the reversal rules below continue unchanged.
Conditions to Claim ITC under Section 16
ITC is not automatic. All of the following conditions in Section 16 must be satisfied before you can claim credit for the GST on a purchase.
- You are a GST-registered taxable person
- You hold a valid tax invoice or debit note
- You have received the goods or services
- The invoice appears in your GSTR-2B [Sec 16(2)(ba)]
- The supplier has actually paid the tax to the government
- You have filed your GSTR-3B for the period
- You pay the supplier within 180 days of the invoice date
Under Section 16(4), ITC for a financial year must be claimed by the earlier of the GSTR-3B due date for 30 November of the following year, or the date you file the annual return (GSTR-9). For FY 2025-26 that means on or before 30 November 2026 — filing GSTR-9 early can close the window sooner. Unclaimed ITC after this date lapses permanently.
GSTR-2B — No 2B, No ITC
GSTR-2B is an auto-drafted, static ITC statement generated for each tax period (available around the 14th of the month). It is built from your suppliers' GSTR-1, GSTR-5 and GSTR-6 filings and shows the ITC available, ITC to be reversed and ITC not available. Since Section 16(2)(ba), you can claim only ITC that reflects in your GSTR-2B — provisional or excess claims are not allowed.
| Statement | What it is | Role in ITC |
|---|---|---|
| GSTR-2B | Static auto-drafted ITC statement (monthly, ~14th) | Basis of claim |
| GSTR-2A | Dynamic view of suppliers' filings | Reference / reconciliation only |
| GSTR-3B | Your monthly summary return | ITC is claimed & utilised here |
| Purchase register | Your own books | Reconcile against 2B every month |
Reconcile your purchase register with GSTR-2B every month and chase suppliers whose invoices are missing.
The 180-Day Payment Rule
If you do not pay the supplier the invoice value plus GST within 180 days of the invoice date, the ITC already claimed must be reversed and added to output tax with interest. Once you make the payment, you can re-avail that ITC — with no time bar under Section 16(4) on re-availment.
When ITC is reversed for non-payment within 180 days, interest at 18% per annum applies for the period the credit was wrongly retained. Track supplier ageing so a slow-paying vendor does not silently trigger a reversal.
Struggling to reconcile GSTR-2B or facing an ITC mismatch notice?
Talk to a GST Expert →Blocked Credits — Where ITC Is Never Allowed
Even if GST was paid and all Section 16 conditions are met, Section 17(5) blocks ITC on certain supplies. These are the most common blocked credits.
| Supply | ITC? | Key exception |
|---|---|---|
| Motor vehicles (seating ≤ 13, incl. driver) | Blocked | Allowed for resale, passenger transport, driving school |
| Food, beverages, outdoor catering, beauty | Blocked | Allowed if used for onward taxable supply or statutory obligation |
| Membership of clubs, health & fitness centres | Blocked | — |
| Life & health insurance, LTC / travel benefits | Blocked | Allowed where obligatory for employees under a law |
| Works contract for immovable property | Blocked | Allowed for plant & machinery |
| Construction of immovable property on own account | Blocked | Allowed for plant & machinery |
| Goods lost, stolen, destroyed, gifted, free samples | Blocked | — |
| Tax paid under composition scheme | Blocked | Composition dealers cannot claim any ITC |
This is a summary — read the full list with each exception in our blocked-credit guide.
Not sure if a purchase is blocked under 17(5)?
See blocked-credit rules →When ITC Must Be Reversed
ITC that has been claimed has to be reversed in the situations below. Rules 42 and 43 handle the split when inputs and capital goods are used for both taxable and exempt supplies.
| Situation | Rule / Section | Action |
|---|---|---|
| Supplier not paid within 180 days | 2nd proviso to 16(2) | Reverse ITC + interest; re-avail on payment |
| Inputs used partly for exempt supplies | Rule 42 | Proportionate reversal |
| Capital goods used partly for exempt supplies | Rule 43 | Proportionate reversal (over useful life) |
| Credit note issued by supplier | Section 34 | Reduce ITC accordingly |
| Invoice not reflected in GSTR-2B | Section 16(2)(ba) | ITC not available until it appears |
| Goods lost, stolen, destroyed or gifted | Section 17(5)(h) | Full reversal |
Sections 16(5) and 16(6) (inserted by the Finance (No. 2) Act, 2024, with effect from 1 July 2017) override the Section 16(4) deadline for early years: ITC for FY 2017-18 to FY 2020-21 is valid if the relevant GSTR-3B was filed by 30 November 2021, and credit denied only on the old time-bar can be restored via rectification on the portal.
Received an ITC reversal or 73/74 demand notice?
Get GST Notice Help →Input Tax Credit — Frequently Asked Questions
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