Input Tax Credit (ITC) — Rules & How to Claim
Updated June 2026 · VerifiedWhat Are the Conditions to Claim ITC Under Section 16?
Section 16 of the CGST Act lays down the following conditions for claiming Input Tax Credit:
- You must be a registered taxable person.
- You must possess a valid tax invoice or debit note issued by the supplier.
- You must have received the goods or services.
- The supplier must have filed their GSTR-1 and the invoice must reflect in your GSTR-2B.
- The tax charged must have been paid to the government by the supplier.
- You must have filed your own GSTR-3B return.
- Payment for the invoice must be made to the supplier within 180 days from the date of invoice; otherwise, the ITC must be reversed with interest.
What Is GSTR-2B and How Does It Affect ITC?
GSTR-2B is an auto-drafted ITC statement generated on the 14th of each month. It shows the ITC available, ITC to be reversed, and ITC not available based on the GSTR-1, GSTR-5, and GSTR-6 filed by your suppliers. You can only claim ITC that appears in your GSTR-2B — any excess claim is restricted.
What Are Blocked Credits Under Section 17(5)?
Section 17(5) of the CGST Act lists items on which ITC cannot be claimed, even if GST was paid:
- Motor vehicles and conveyances (except when used for specified purposes like transportation, driving schools, etc.)
- Food, beverages, outdoor catering and beauty treatment, health services, cosmetic and plastic surgery (unless for onward supply or as an employee obligation)
- Membership of clubs, health & fitness centres
- Life and health insurance (unless obligatory for employees or for onward supply)
- Travel benefits for employees on vacation such as LTC
- Works contract services for construction of immovable property (except plant and machinery)
- Construction of immovable property on own account
- Goods or services received by a non-resident taxable person except imported goods
- Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
- Tax paid under composition scheme
When Must ITC Be Reversed?
ITC already claimed must be reversed in the following situations:
| Scenario | Rule / Section | Action Required |
|---|---|---|
| Non-payment to supplier within 180 days | Section 16(2) | Reverse ITC + pay interest at 18% |
| Goods/services used partly for exempt supplies | Rule 42 | Proportionate reversal |
| Capital goods used partly for exempt supplies | Rule 43 | Proportionate reversal |
| Credit note issued by supplier | Section 34 | Reduce ITC accordingly |
| Invoice not in GSTR-2B | Section 16(2)(ba) | ITC not available until reflected |
| Inputs used for personal consumption | Section 17(5) | Full reversal |
What Is the Timeline for Claiming ITC?
ITC for a financial year can be claimed up to the earlier of:
- The due date of filing GSTR-3B for September of the following financial year, or
- The date of filing the annual return (GSTR-9) for that year.
For example, ITC relating to FY 2025-26 must be claimed by the GSTR-3B due date for September 2026 (i.e., 20 October 2026) or the date of filing GSTR-9 for FY 2025-26, whichever is earlier.
Frequently Asked Questions
Can a composition dealer claim Input Tax Credit?
No. Composition dealers under Section 10 of the CGST Act cannot claim ITC. They pay tax at a fixed rate on turnover without the benefit of input credit.
Is ITC available on capital goods?
Yes. ITC on capital goods can be claimed in full in the tax period in which the goods are received, provided all conditions under Section 16 are met and the goods are not blocked under Section 17(5).
Can ITC be claimed on GST paid under reverse charge?
Yes. ITC on GST paid under the reverse charge mechanism can be claimed in the same month in which the tax is paid, provided the goods or services are used for business purposes and other conditions are met.
What happens to ITC if the supplier does not file their return?
If the supplier does not file GSTR-1, the invoice will not appear in your GSTR-2B, and you cannot claim ITC. You must follow up with the supplier or consider the ITC as unavailable until it reflects in GSTR-2B.
Can ITC be transferred from one GSTIN to another?
ITC cannot be directly transferred between GSTINs. However, in case of transfer of business as a going concern, ITC can be transferred to the transferee through Form ITC-02 as per Section 18(3) of the CGST Act.
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