Can I claim ITC on a car bought for my business?

Usually not. Credit on motor vehicles carrying up to 13 people is blocked, unless you sell vehicles, run a driving school, or use the vehicle to carry passengers or goods as your business.

What happens if my supplier does not file GSTR-1?

The invoice will not appear in your GSTR-2B, so you cannot claim the credit until the supplier reports it. Follow up with the supplier, and consider holding back the GST portion of their payment.

Can I claim ITC on capital goods like machinery?

Yes, if they are used for taxable business supplies and the credit is not blocked. You cannot claim both ITC and income tax depreciation on the GST portion.

Is there a deadline to claim ITC?

Yes. You must claim it by 30 November after the end of the financial year, or by the date you file the annual return, whichever is earlier.

Input tax credit (ITC) under GST

Updated 11 October 2026

Input tax credit (ITC) is the GST a registered business has paid on its purchases, which it can deduct from the GST it collects on its sales. It is what makes GST a tax on value added rather than a tax on tax. To claim it, you need a valid invoice, the goods or services must be used for business, and the supplier must have reported the invoice and paid the tax.

How input tax credit works

Every month, a registered business works out two numbers: the GST it charged customers (output tax) and the GST it paid suppliers on business purchases (input tax). It pays the government only the difference. If input tax is higher, the extra credit is carried forward to the next month.

Worked example. A trader buys stock for ₹1,00,000 plus 18% GST of ₹18,000, and sells it for ₹1,50,000 plus 18% GST of ₹27,000.

Output tax collected: ₹27,000
Input tax credit: ₹18,000
GST payable in cash: ₹27,000 minus ₹18,000 = ₹9,000

Check: the trader added value of ₹1,50,000 minus ₹1,00,000 = ₹50,000, and 18% of ₹50,000 is ₹9,000. Without ITC, the trader would pay ₹27,000 and the ₹18,000 paid on purchases would become a cost passed on to customers.

Conditions to claim ITC

Under section 16 of the CGST Act, you can claim credit only if all of these are met:

You hold a valid tax invoice or debit note from a registered supplier.
The invoice appears in your auto-drafted GSTR-2B, which means the supplier has reported it in their GSTR-1.
You have received the goods or services. Goods delivered to someone else on your instructions also count.
The supplier has actually paid the tax to the government.
You have filed your own GSTR-3B return.
The purchase is used, or meant to be used, for your business.

You must also pay your supplier within 180 days of the invoice date. If you do not, the credit has to be added back to your tax with interest, and you can claim it again once you pay.

Since October 2024, the Invoice Management System (IMS) on the GST portal lets you accept, reject or keep pending each supplier invoice before your GSTR-2B is finalised. Rejecting a wrong invoice keeps it out of your credit.

Blocked credits: where ITC is not allowed

Section 17(5) lists purchases on which credit is blocked even if used in business. The main ones:

Motor vehicles for carrying up to 13 people (including the driver), and their repair and insurance, unless you deal in vehicles, run a driving school or use them to transport passengers
Food and beverages, outdoor catering, beauty treatment, health services and cosmetic surgery
Life and health insurance, club and gym memberships, and travel benefits for employees such as leave travel
Construction of a building on your own account, including works contracts, except for plant and machinery
Goods lost, stolen, destroyed, written off or given away as gifts or free samples
Anything for personal use, and tax paid under the composition scheme

Credit on items like canteen food or insurance is allowed when a law requires the employer to provide them to employees. The 57th GST Council meeting in October 2026 recommended relaxing some of these restrictions, such as for outdoor catering, insurance, free samples and certain same-line-of-business purchases. These changes apply only after the law is amended and notified.

Time limit to claim

ITC for an invoice must be claimed by the earlier of:

30 November following the end of the financial year to which the invoice relates, or
the date you file your annual return for that year.

So for an invoice dated in March 2026 (FY 2025-26), the last chance is normally the GSTR-3B filed by 30 November 2026.

How credit is used to pay tax

Your ITC sits in the electronic credit ledger on the GST portal, separated into IGST, CGST and SGST. It is used in a fixed order: IGST credit first against IGST, CGST credit cannot pay SGST and vice versa. The full rules, with an example, are in CGST, SGST and IGST explained.

Tax under reverse charge cannot be paid from the credit ledger. It must be paid in cash, after which it can be claimed as credit.

When ITC must be reversed

Worked example. On 1 April 2026 a business receives consulting services worth ₹2,00,000 plus GST of ₹36,000, and claims the ₹36,000 as credit in April. By 28 September 2026, 180 days after the invoice date, it still has not paid the consultant. It must add ₹36,000 to its output tax in the return for that period and pay interest. When it finally pays the consultant in November, it can claim the ₹36,000 again.

Credit is also reversed when goods are used partly for exempt supplies or personal use (in proportion), when a supplier issues a credit note, or when stock is lost or destroyed.

Who cannot claim ITC

Consumers and unregistered persons
Businesses under the composition scheme
Restaurants, hotels up to ₹7,500 a night, salons and gyms that charge 5% without credit
Anyone whose supplier is under composition, since composition dealers do not charge GST

Use our GST calculator to work out the tax on your purchases and sales. The ITC rules are in chapter V of the CGST Act on cbic-gst.gov.in.