Detailed Explanation
How it works
ITC is available only if you hold a valid tax invoice, have received the goods or services, the supplier has paid the tax, and the invoice appears in your GSTR-2B (Section 16). It cannot be claimed on blocked items under Section 17(5).
The four conditions of Section 16(2)
ITC requires all four, simultaneously: (a) possession of a valid tax invoice; (aa) the invoice appearing in your GSTR-2B (supplier has filed GSTR-1); (b) receipt of the goods or services; and (c) the supplier having actually paid the tax, with (d) your GSTR-3B filed. Add the payment condition — pay the supplier within 180 days or reverse the credit proportionately with interest — and the time bar of Section 16(4): claim by 30 November following the financial year or the annual return date, whichever is earlier.
Worked example
You receive an invoice dated 28 March 2027 for Rs.1,00,000 + Rs.18,000 GST, goods delivered 3 April 2027. The credit belongs to FY 2027-28 (receipt condition), enters your 2B only when the supplier files, and must be availed by 30 November 2028. If the supplier never files GSTR-1, the Rs.18,000 is not creditable regardless of your invoice — which is why vendor GST compliance is a procurement criterion, not just a tax one.
Restrictions layered on top
Section 17(5) blocks specific categories (motor vehicles, food and catering, construction on own account, gifts); Rules 42/43 apportion credit where you make exempt supplies; and the electronic credit ledger cannot be used for RCM liabilities. Reconcile availed ITC to GSTR-2B monthly — the mismatch is the single most common GST notice trigger.
Frequently asked questions
When can ITC be claimed?
When you have a valid invoice, have received the supply, the tax is paid to the government, and the invoice appears in GSTR-2B.
What is the time limit to claim ITC?
Up to 30 November following the end of the financial year, or the date of the annual return, whichever is earlier (Section 16(4)).
This content is for general guidance only and does not constitute professional advice. Tax law changes frequently — verify the current position and consult a qualified Chartered Accountant before acting. Last reviewed: June 2026.