How to Claim Input Tax Credit (ITC) Under GST — Step-by-Step Guide

Updated: 3 June 2026 | CGST Act 2017, Section 16 & 17(5) | CGST Rules as amended June 2026

To claim Input Tax Credit (ITC) under GST, you need to satisfy all four conditions under Section 16: (1) hold a valid GST tax invoice, (2) goods or services must have been received, (3) the supplier must have paid the GST to the government (verifiable via GSTR-2B), and (4) you must claim it in your GSTR-3B return. ITC auto-populates in GSTR-2B on the 14th of each month. Claim it in GSTR-3B before the September deadline of the next financial year.

GSTR-2B

Your monthly ITC statement — auto-populated from suppliers' GSTR-1 filings
Available on the GST portal from the 14th of each month. Reconcile with your purchase register before claiming ITC in GSTR-3B.

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Only claim ITC that appears in GSTR-2B. Rule 36(4) restricts extra provisional ITC to 5% of GSTR-2B eligible credit. Claiming unsupported ITC triggers demand notices, 18% interest per annum, and penalties up to 100% of tax. Always reconcile GSTR-2B against your purchase register every month before filing.

Section 16 — 4 Mandatory Conditions for ITC Eligibility

CONDITION 1

Valid Tax Invoice from a GST-Registered Supplier

You must hold a valid GST tax invoice showing the supplier's GSTIN, your GSTIN, HSN/SAC code, taxable value, and CGST/SGST/IGST amounts. Proforma invoices, quotes, purchase orders, and receipts from composition dealers do not qualify. For imports, the Bill of Entry serves as the ITC document.

CONDITION 2

Goods or Services Must Have Been Actually Received

ITC is available only after receipt of goods or services. For goods in instalments, ITC is available only when the last instalment is received. For advance payments, ITC cannot be claimed until delivery. For services, receipt is considered complete when the service is performed.

CONDITION 3

Supplier Has Filed GSTR-1 and Paid Tax to Government

The supplier must have declared your invoice in their GSTR-1 and paid the GST via GSTR-3B. ITC reflecting in your GSTR-2B is the best confirmation. If the supplier defaults on payment, your ITC can be reversed under Rule 37A with 18% interest. Verify supplier GSTIN filing status before finalising large payments.

CONDITION 4

Claimed in GSTR-3B Within the Time Limit

ITC must be claimed in GSTR-3B by the earlier of: (a) the return for September of the following financial year, or (b) filing of GSTR-9 annual return. After the deadline, the ITC lapses and cannot be recovered. This is an absolute cut-off with no extension or amnesty generally available.

ITC Claim Process — Month-by-Month Steps

Step	Action Required	Platform / Tool	When
1	Collect and verify all supplier tax invoices	Purchase register / ERP / accounting software	Throughout the month
2	Download GSTR-2B auto-drafted ITC statement	GST Portal → Return Dashboard → GSTR-2B	After 14th of the month
3	Reconcile GSTR-2B with purchase register; identify mismatches	Excel reconciliation / accounting software ITC matching	14th–20th of following month
4	Identify and exclude blocked ITC (Section 17(5))	Internal compliance review / CA	Before filing GSTR-3B
5	Claim eligible ITC in Table 4 of GSTR-3B	GST Portal → File GSTR-3B	By 20th of following month
6	Annual ITC reconciliation — books vs GSTR-2B vs GSTR-3B	GSTR-9 Table 8 — Annual Return	By December 31 of following FY

Blocked ITC — Section 17(5) Quick Reference

Category	ITC Allowed?	Key Exceptions
Motor vehicles (passenger cars, motorcycles)	Blocked	Transport of goods, cab operators, vehicle dealers, driving schools
Food, beverages, outdoor catering	Blocked	If outward supply of same category (restaurants, caterers)
Health services, beauty treatment, cosmetics	Blocked	If mandatory under law or outward supply of same services
Health & life insurance premiums	Conditional	Allowed if mandatory under any law; or outward supply of insurance
Club memberships, gym & fitness	Blocked	No exceptions
Works contract for immovable property	Blocked	Allowed for plant and machinery only
Goods/services for personal use	Blocked	No exceptions

ITC Under Reverse Charge Mechanism (RCM)

For RCM supplies (e.g., legal services, goods transport agency, import of services from overseas), the buyer pays GST. Key rules:

RCM GST liability must be paid in cash in GSTR-3B (cannot use existing ITC balance to pay RCM)
Once RCM GST is paid, ITC on the same amount can be claimed in the same or subsequent GSTR-3B
A self-invoice must be generated when receiving services from an unregistered supplier under RCM
ITC on RCM is also subject to Section 16 conditions and blocked credit rules under Section 17(5)

ITC time limit — do not miss September deadline: For all invoices of FY 2024-25, ITC must be claimed latest by GSTR-3B filed for September 2025 (due date 20 October 2025) or GSTR-9 annual return for FY 2024-25, whichever is filed first. Missed ITC cannot be recovered. If your accounting is delayed, prioritise GSTR-2B downloads and claims before October.

Frequently Asked Questions

ITC not showing in GSTR-2B — what should I do?

If ITC is not in your GSTR-2B, the most common reason is that your supplier has not filed their GSTR-1. Steps to resolve: (1) Contact the supplier and ask them to file or amend GSTR-1 to include your invoice. (2) Verify that invoice details in your books exactly match what the supplier reports — GSTIN, invoice number, date, and taxable value must match. (3) Wait for GSTR-2B to update after the supplier files. Rule 36(4) caps provisional ITC at 5% of GSTR-2B eligible credit — do not claim more without GSTR-2B support as it invites demand notices and 18% interest.

If my supplier does not pay GST to the government, will my ITC be reversed?

Yes. Section 16(2)(c) of the CGST Act requires the supplier to have actually paid the tax. Rule 37A (inserted 2022) mandates ITC reversal with 18% interest per annum if the supplier fails to pay within 60 days of the invoice date. After reversal, if the supplier subsequently pays, you can re-claim the ITC. This makes supplier compliance verification critical — especially for new or large-value vendors. Check supplier GSTIN filing status regularly on the GST portal.

What is the time limit for claiming ITC under GST?

Under Section 16(4) CGST Act, ITC must be claimed by the earlier of: (a) filing GSTR-3B for September of the financial year following the invoice year — for a May 2024 invoice, the deadline is GSTR-3B for September 2025 (filed by 20 October 2025), or (b) filing the annual return GSTR-9. Missing this deadline means the ITC lapses permanently with no recourse. This makes monthly GSTR-2B reconciliation essential so no eligible ITC is missed within the window.

Can ITC be claimed on advance payments made to suppliers?

No. ITC can only be claimed after actual receipt of goods or services — Section 16(2)(b) is explicit on this. A receipt voucher issued against an advance payment does not entitle the buyer to ITC. ITC becomes available only when the tax invoice is issued and the goods/services are received. For goods supplied in instalments, ITC is available only when the last instalment is received. For continuous supply of services (e.g., annual subscriptions), ITC is available when the periodic invoice is issued and the service period has commenced.

What is blocked ITC under Section 17(5)?

Section 17(5) CGST Act permanently blocks ITC on: (1) Motor vehicles for personal transport — exceptions for transport of goods, passenger vehicle dealers, cab operators, driving schools. (2) Food, beverages, outdoor catering, beauty treatment, health services, cosmetics — unless the business itself provides these services outward. (3) Club memberships, health and fitness centres. (4) Life and health insurance — unless mandatory under law. (5) Rent-a-cab — unless mandatory under law. (6) Works contract services for construction of immovable property — except plant and machinery. (7) All goods and services for personal consumption. Claiming blocked ITC is a GST offence attracting demand plus up to 100% penalty.

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