Input tax credit under GST: what you can claim, when, and what is blocked

A registered person may take credit of GST paid on goods and services used, or intended to be used, in the course or furtherance of business, if all of the following are met under section 16(2):

1. You hold a tax invoice or debit note from a registered supplier, with the particulars Rule 46 requires; see our invoice guide.
2. You have received the goods or services. For goods delivered in lots, credit is taken on the last lot.
3. The supplier has reported the invoice and the tax has been paid. In practice: the invoice appears in your GSTR-2B.
4. You have filed your own return in GSTR-3B.

Composition taxpayers, and anyone making only exempt supplies, take no credit at all.

Credit is limited to what appears in GSTR-2B, the static statement generated on the 14th of each month from suppliers’ filings. There is no longer any provisional allowance above it. Since October 2024 the invoice management system sits in front of it: each supplier invoice arrives for you to accept, reject or keep pending, and only accepted or untouched invoices flow into GSTR-2B.

Two consequences. First, a genuine purchase whose supplier has not filed gives no credit until they do; chasing suppliers is now part of the month-end. Second, the department has indicated that the credit table in GSTR-3B will be locked to GSTR-2B, as the liability table already has been since the July 2025 period. Treat GSTR-2B as the ceiling now.

Credit on an invoice or debit note must be taken by the earlier of 30 November following the end of the financial year to which it relates and the date of filing the annual return. For FY 2025-26 invoices that means the GSTR-3B for October 2026, filed by 20 November 2026, is effectively the last return in which to claim. Credit missed after that is lost, and no notification has ever extended it generally.

Rule 37. If you do not pay your supplier the value of the invoice with tax within 180 days of the invoice date, the credit taken must be reversed in the GSTR-3B for the period after the 180th day, with interest at 18 percent. It can be taken again when the payment is made, with no time limit on the re-claim.

Rule 37A. If the supplier reported the invoice in GSTR-1 but has not filed the GSTR-3B for that period by 30 September of the following year, the credit must be reversed by 30 November, and can be re-claimed once the supplier files.

Both rules make vendor ageing a tax matter. A quarterly report of creditors over 150 days is the cheapest control.

• Motor vehicles with seating up to 13 persons, and their insurance and repairs, unless used for transporting passengers or goods for hire, driving training, or resale.
• Food and beverages, outdoor catering, beauty treatment, health services, life and health insurance, unless the law obliges the employer to provide them or they are an input for the same kind of outward supply.
• Club and fitness memberships, and travel benefits to employees on leave.
• Works contract services and goods or services for constructing immovable property on your own account, other than plant and machinery.
• Goods lost, stolen, destroyed, written off, or given as gifts or free samples.
• Goods or services used for personal consumption.
• Expenditure on corporate social responsibility obligations.
• Tax paid under the composition scheme, and tax paid after fraud-based demands.

Where inputs are used partly for exempt supplies or non-business purposes, credit is apportioned under Rules 42 and 43 and the ineligible part reversed every month, with a year-end true-up.

Integrated tax credit is used first, against integrated tax and then central and state tax in any order; central tax credit cannot pay state tax and the reverse. Reverse charge liability is always paid in cash. Taxpayers with monthly taxable turnover above ₹50 lakh must pay at least 1 percent of their liability in cash under Rule 86B, with exceptions for those with a record of income-tax payments or refunds. Businesses with several registrations under one PAN must distribute common credit through the input service distributor mechanism, mandatory since 1 April 2025.

Credit wrongly taken and used attracts interest at 18 percent and a penalty; credit wrongly taken but not used attracts no interest. If a notice has arrived, see our notice reply service; to have the reconciliation done monthly, our return filing plans include it.