In India, a GST-registered person can generally claim input tax credit (ITC) on goods or services used or intended for use in the course or furtherance of business—but only if the statutory conditions are met and no restriction or reversal rule applies. An invoice or GSTR-2B entry does not by itself make credit claimable: check the supply, business use, tax treatment, documents, blocked-credit rules and time limit.
Who can claim input tax credit under GST?
Section 16(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) provides the general entitlement to a registered person for input tax charged on a supply of goods or services used, or intended to be used, in the course or furtherance of business. That entitlement is subject to the Act, its conditions and restrictions, and the prescribed rules. This article explains the India-wide CGST framework; the corresponding SGST or UTGST provisions and the facts of a particular transaction may also matter. Read section 16 of the CGST Act.
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For an individual purchase, work through the checks below rather than treating GST shown on an invoice as automatically recoverable.
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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minute- Confirm the claimant and document. The claimant must be a registered person entitled to claim the credit and must hold a prescribed tax document, such as a valid tax invoice or debit note.
- Confirm receipt. The goods or services must have been received. If goods covered by an invoice are received in lots or instalments, the Act’s special receipt rule applies.
- Check business use and output supplies. Identify whether the purchase is used for business, non-business purposes, taxable or zero-rated supplies, exempt supplies, or a mix of these. Mixed use can require apportionment.
- Check for a specific restriction. Test the purchase against section 17(5)’s blocked-credit categories, including any exception that might apply.
- Check tax and return conditions. Section 16(2) includes conditions concerning payment of tax to the Government, subject to section 41, and furnishing the return under section 39.
- Check the deadline and subsequent events. Consider the applicable section 16 time limit and whether non-payment to the supplier, a change in use, or another event requires an adjustment or reversal.
There is also a specific restriction where a registered person claims depreciation under the Income-tax Act on the tax component of the cost of capital goods: section 16(3) bars ITC on that same tax component. The CGST Act sets out these conditions and restrictions, while the CGST Rules prescribe related procedures and calculations.
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Which expenses are blocked under GST?
Section 17(5) lists specified inward supplies for which ITC is blocked, subject to qualifications and exceptions in the provision. The categories below are a screening guide, not a substitute for checking the precise subclause and facts of the purchase. See section 17(5) of the CGST Act for the statutory list and exceptions.
| Purchase or circumstance | What to check |
|---|---|
| Certain motor vehicles and conveyances | The vehicle’s use and the permitted business categories specified by the Act. Do not assume every vehicle purchase is blocked or that business use alone makes every vehicle credit available. |
| Food and beverages, outdoor catering, beauty or health services, cosmetic or plastic surgery, club or fitness-centre membership, rent-a-cab and insurance | Whether the particular item falls within a listed category and whether a statutory exception applies—for example, an exception tied to making a taxable supply of the same category or to a legal obligation in a covered case. |
| Travel benefits for employees on vacation | Whether the expense is the kind of vacation travel benefit covered by section 17(5). |
| Works-contract services for construction of immovable property, and goods or services used to construct immovable property on a person’s own account | The nature and use of the property, the type of supply and the statutory treatment of plant and machinery and other exceptions. The construction provisions are not a blanket rule for every works contract or property-related expense. |
| Goods or services taxed under the composition scheme | Whether the inward supply is one on which tax has been paid under the composition scheme. |
| Supplies to a non-resident taxable person | The provision excludes imported goods from this category; check the exact transaction and statutory wording. |
| Personal consumption; goods lost, stolen, destroyed or written off; gifts and free samples | Whether the goods or services fall within the listed personal-use or loss, disposal, gift or sample circumstances. |
| Tax paid in specified demand or enforcement circumstances | Whether the tax arises in one of the specific cases covered by section 17(5), rather than an ordinary eligible inward supply. |
A blocked credit under section 17(5) is different from credit that must be apportioned because a purchase is used partly for non-business or exempt supplies. An exception to a blocked-credit category must be established under the statute; it should not be inferred solely from the fact that an expense relates to the business.
How do business use and exempt supplies affect credit?
Sections 17(1) and 17(2) restrict credit respectively for non-business use and for supplies used in making exempt supplies. Zero-rated supplies are treated differently from exempt supplies for this purpose. Where an input, input service or capital good is shared, the prescribed attribution rules—not an assumed flat percentage—determine the eligible portion. Rules 42 and 43 set out the relevant common-credit calculations.
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|---|---|
| Exclusively for business and taxable or zero-rated supplies | Potentially eligible, subject to the other section 16 conditions and any section 17(5) restriction. |
| Exclusively for non-business purposes or exempt supplies | Credit is restricted to the extent specified by sections 17(1) and 17(2). |
| Common to business and non-business use, or to taxable/zero-rated and exempt supplies | Apportion the credit under the applicable prescribed rule; capital goods and common inputs or input services have distinct calculations. |
Keep the use and supply mix under review: if they change, the applicable attribution rules may require an adjustment. The exact computation depends on the taxpayer’s facts and the applicable version of the rules.
When must ITC be reversed?
A credit that was initially claimable may later need to be reversed or adjusted. This is not the same as a permanently blocked credit: some reversals arise from a later event and may be eligible to be taken again when the statutory condition is met.
Non-payment to the supplier within 180 days
Under the proviso to section 16(2), a recipient who has claimed ITC but does not pay the supplier the value of the supply plus tax within 180 days from the invoice date must add the credit to output tax liability with interest, in the prescribed manner. The recipient may take the credit again when payment is made. This 180-day proviso does not apply to supplies on which tax is payable under reverse charge. The CGST Rules address the reversal reporting and interest period. See section 16(2) of the CGST Act and the CGST Rules.
Common-credit apportionment and other adjustments
Where shared inputs, input services or capital goods serve both eligible and restricted uses, apply the relevant rule 42 or rule 43 calculation rather than claiming the full common amount. Other circumstances—including a change in use or a credit note—may also affect the credit and should be assessed under the applicable provisions and facts.
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Does an entry in GSTR-2B mean the credit is eligible?
No. GSTR-2B is useful for matching and review, but it does not decide every condition that applies to the recipient. The GST portal says: “Taxpayers would be eligible to avail input tax credit based on the ITC indicated in Form GSTR-2B, as per availability/ eligibility of ITC.” The portal also advises taxpayers to self-assess other circumstances that may make credit unavailable and to claim or reverse credit in GSTR-3B as applicable. Read the GST portal’s GSTR-2B FAQ.
In practice, match the statement against the invoice and receipt, business use, supply classification, blocked-credit provisions, payment status and deadline. A missing or present portal entry does not replace that eligibility assessment.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How should ineligible ITC and reversals be reported?
CBIC Circular 170/02/2022-GST explains reporting of ineligible or blocked ITC and reversals in GSTR-3B and GSTR-1. Its examples distinguish rule 42/43 apportionment, section 17(5) blocked credit, credit where the supply was not received, and the supplier-payment reversal under rule 37. In the table framework described by the circular, section 17(5) reversals are reported as reversals rather than duplicated as a separate ineligible-ITC item. Read Circular 170/02/2022-GST, dated 6 July 2022.
That circular is a 2022 clarification, not a guarantee that every return-table instruction remains unchanged. Check the current GSTR-3B form and portal instructions before filing.
What is the time limit to claim ITC?
The general limit in section 16(4), as described in CBIC Circular 237/31/2024-GST, is 30 November following the end of the financial year to which the invoice or debit note pertains, or the date the relevant annual return is furnished, whichever is earlier. Apply the limit to the relevant invoice or debit note and return history; it is not a universal date that can be applied without reference to the financial year.
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There are also retrospective provisions. The Finance (No. 2) Act, 2024 inserted sections 16(5) and 16(6) with effect from 1 July 2017, providing time-limit relief in specified cases. CBIC’s circular explains that this relief applies where denial is solely for contravention of section 16(4); it does not cure a separate reason the credit is unavailable. The circular is dated 15 October 2024. For a real claim, check the applicable year, amendments, notifications and return history against the official guidance. Read Circular 237/31/2024-GST.
How do zero-rated supplies affect ITC?
Exports and supplies to a Special Economic Zone (SEZ) developer or unit are zero-rated supplies under section 16 of the IGST Act. The Act allows ITC for zero-rated supplies notwithstanding their exempt treatment, subject to CGST Act restrictions such as the section 17(5) blocked-credit rules. It describes refund routes that include supplying under a bond or Letter of Undertaking without payment of IGST and seeking a refund of unutilized credit, subject to applicable conditions. See section 16 of the IGST Act.
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