Purchase › Input tax credit conditions

Input tax credit: when you can claim the GST on a purchase bill

The GST on your purchase bills is money the government owes back to you, but only if every condition is met. Most lost credit comes from a few simple misses: a bill not uploaded by the supplier, a bill never paid, or a claim made too late.

The conditions of section 16(2)

A registered business can take input tax credit on a purchase only when all of these are true:

1. You have the tax invoice (or debit note) from the supplier.
2. You have received the goods or services. Goods sent on your instructions to someone else count as received.
3. The supplier has reported the bill in their GSTR-1, so it shows in your GSTR-2B (section 16(2)(aa)). Credit is taken only for bills that appear there.
4. The supplier has actually paid the tax to the government.
5. You have filed your own return (GSTR-3B).

Pay the supplier within 180 days

If you do not pay the supplier the value of the bill plus GST within 180 days from the invoice date, you must add the credit back to your tax, with interest (second proviso to section 16(2) and Rule 37). When you pay later, you can take the credit again. The "Dues › To pay" list here shows bills by age, so the ones near 180 days stand out.

The time limit

Credit for a bill must be taken by 30 November after the end of the financial year of the bill, or the date you file the annual return for that year, whichever is earlier (section 16(4)). A bill of 2026-27 must be claimed by 30 November 2027 at the latest. Credit missed after that is lost.

Credit that is never allowed

Section 17(5) blocks credit on some purchases even when the bill is correct. The common ones for small businesses:

• Cars and other motor vehicles for up to 13 people, and their repair and insurance, unless you deal in vehicles, run transport of passengers, or train drivers.
• Food and drinks, outdoor catering, beauty treatment, health services, club or gym membership, except where you sell the same kind of service or the law makes you provide it to staff.
• Building or repairing your own building (other than plant and machinery), even when the cost is added to the asset.
• Goods lost, stolen, destroyed, written off, or given away as gifts or free samples.
• Tax paid under the composition scheme, and tax paid on account of fraud or wilful misstatement.

A monthly check that saves credit

1. Print the purchase register for the month.
2. Open GSTR-2B on the GST portal for the same month.
3. Tick each bill in both. A bill in your register but not in GSTR-2B means the supplier has not uploaded it: call them before they file the next return.
4. Claim in GSTR-3B only what is in GSTR-2B and not blocked.

This page explains the general rules. Your accountant should decide credit on capital goods, mixed (taxable and exempt) sales, and anything unusual.