Input Credit Basics
Input Tax Credit (ITC) lets you offset tax paid on purchases against tax collected on sales. Proper documentation and timely filing are essential to claim it.
Eligibility Conditions
To claim ITC, ensure:
- Goods or services are used for business purposes
- Supplier has filed GSTR-1 and tax appears in your GSTR-2B
- You hold a valid tax invoice or debit note
- Goods have been received (for goods) or service period has ended
Blocked Credits
Certain expenses do not qualify for ITC:
- Motor vehicles (except for specified business use)
- Food, health, and membership club expenses
- Personal consumption or gifts
- Construction of immovable property (except plant and machinery)
Documentation Best Practices
Maintain invoices with correct GSTIN, HSN, and tax breakdown. Reconcile monthly with GSTR-2B. Address mismatches with suppliers before the annual return deadline.
Conclusion
Leaving ITC unclaimed is like leaving money on the table. Good billing software helps track purchase invoices and flags reconciliation issues early.