GST

Input Tax Credit — Golden Rules

CA Sutra Team 3 min January 15, 2025
GST ITC Taxation Compliance
Summary

Understand the four essential conditions to claim Input Tax Credit under GST. Master these golden rules to ensure proper ITC claims and avoid notices.

Understanding the Concept

Input Tax Credit (ITC) is the cornerstone of GST's tax credit mechanism. It allows businesses to reduce their tax liability by claiming credit for taxes paid on inputs. However, claiming ITC comes with strict conditions that must be met simultaneously.

Key Conditions

  • 1. Valid tax invoice or debit note from registered supplier
  • 2. Goods or services must be received
  • 3. Supplier must have uploaded the invoice in GSTR-1
  • 4. Tax must be paid to the government by the supplier
  • 5. You must have filed your GSTR-3B return

Important Points to Remember

  • ITC can only be claimed if all conditions are met
  • Time limit: ITC must be claimed by September of next FY or annual return filing, whichever is earlier
  • Reversal required if supplier doesn't pay tax within 180 days
  • Blocked credits under Section 17(5) cannot be claimed

Frequently Asked Questions

ITC must be claimed by 30th September of the next financial year or the date of filing annual return, whichever is earlier.

No, one of the essential conditions is that the supplier must have uploaded the invoice in their GSTR-1. You can claim provisional credit, but it must be reversed if not reflected in GSTR-2B.

ITC on blocked items under Section 17(5) like motor vehicles, food & beverages, membership of clubs, etc., cannot be claimed and must be reversed if claimed.
Key Takeaway

Always verify that your supplier has uploaded invoices in GSTR-1 and paid the tax before claiming ITC. Use GSTR-2B for reconciliation.

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