# ITC (Input tax credit)

> Input tax credit (ITC) is the GST you pay on business purchases that you can set off against the GST you collect on sales, so you pay only the difference. You can claim it only on eligible purchases whose invoices appear in your GSTR-2B.

In EaseDesk: EaseDesk marks each line of a purchase bill as eligible, ineligible or capital goods, posts eligible credit to your input tax ledgers, and matches your bills with GSTR-2B before you file GSTR-3B.

## Why it matters to your business

ITC is what makes GST a tax on value added rather than on every sale. Every rupee of credit you
claim correctly is a rupee you do not pay in cash. Every rupee claimed wrongly is a rupee you repay
with interest at 18% a year, and sometimes a penalty. For most trading and manufacturing businesses,
ITC is one of the largest numbers in the monthly return.

## How it works

As of September 2026:

- You pay GST to your vendors on purchases and expenses.
- The credit sits in your electronic credit ledger once you claim it in
  [GSTR-3B](/glossary/gstr-3b), subject to it appearing in your [GSTR-2B](/glossary/gstr-2b).
- You use it to pay your output tax in a fixed order: [IGST](/glossary/igst) credit first against
  IGST, then CGST and SGST; [CGST](/glossary/cgst) credit against CGST and IGST; [SGST](/glossary/sgst)
  credit against SGST and IGST. CGST and SGST credit cannot pay each other.
- Tax paid under [reverse charge](/glossary/reverse-charge) is paid in cash, and then becomes credit
  if the purchase is eligible.

## An example

In a month you sell goods worth ₹10,00,000 at 18%, so your output tax is ₹1,80,000. You buy raw
material and services worth ₹6,00,000 at 18% and pay ₹1,08,000 GST to vendors, all of it in your
GSTR-2B. You set off ₹1,08,000 of credit and pay ₹72,000 in cash.

## Common mistakes

- Claiming credit on invoices that are not in GSTR-2B for that period.
- Claiming credit on blocked items, such as staff meals or a car used by the owner.
- Not reversing credit on bills unpaid after 180 days.
- Claiming credit on bills that carry the wrong GSTIN, yours or the vendor's.

## Questions

### What are the conditions to claim ITC?

You must hold a tax invoice or debit note, have received the goods or services, the invoice must appear in your GSTR-2B, the vendor must have paid the tax and filed their return, and you must file your GSTR-3B. The purchase must also be for your business and not on the blocked list.

### What is the time limit to claim ITC?

For the invoices of a financial year, the 30th of November after that year ends, or the date you file the annual return for that year, whichever comes first.

### On which purchases is ITC not allowed?

The law blocks credit on items such as motor vehicles for personal travel (with exceptions), food and beverages, club memberships, construction of a building for your own use, goods lost, stolen or given as free samples, and anything for personal use.

### What happens if I do not pay my vendor within 180 days?

You must reverse the credit claimed on that bill, with interest, in your GSTR-3B. When you pay the vendor later, you can claim the credit again.

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Source: https://www.easedesk.com/glossary/itc · Updated 2026-09-28 · EaseDesk