Input tax credit (ITC) is the GST you paid on business purchases that you subtract from the GST you collect on sales, so you effectively pay tax only on your value addition. As of Aug 2026 you can claim ITC only for invoices your suppliers have actually reported, as reflected in your GSTR-2B — which is now built through the Invoice Management System (IMS).
Four conditions must all hold: you have a valid tax invoice, you received the goods or services, the supplier reported the invoice and paid the tax, and you file your GSTR-3B. On top of that, if you don't pay the supplier within 180 days, you must reverse the credit with interest and reclaim it after payment. Some credits are blocked outright regardless — most motor vehicles, personal consumption, and goods lost or given away.
Practically, ITC is a monthly discipline. Reconcile your purchase register against GSTR-2B before filing GSTR-3B, act on invoices in IMS, and chase suppliers whose invoices are missing — their non-filing is your cash-flow problem. A supplier who files late or not at all costs you real money that month, so build filing behaviour into how you choose and pay vendors.
The classic mistake is claiming ITC from your books when the invoice never appeared in GSTR-2B. The gap sits quietly until an ASMT-10 scrutiny notice or a DRC-01 demand arrives with interest and penalty attached. Also easy to miss: ITC on reverse-charge payments needs the tax actually paid in cash first, and self-invoicing where the supplier is unregistered.
Act on it
Reviewed to the law in force in FY 2026-27. General information, not advice — confirm the position for your facts before acting.