Input Tax Credit Conditions and Blocked Credit: A Seller's Guide
You can claim input tax credit only when you hold a tax invoice, your supplier has reported it in GSTR-1 so it shows in your GSTR-2B, you have received the goods or service, the tax has reached the Government and you have filed your own return. Even then, section 17(5) blocks credit on a fixed list of purchases.
- Section 16 of the CGST Act sets the conditions for input tax credit (ITC). Section 17(5) lists the purchases on which credit is blocked.
- The last date to claim credit on an invoice is 30 November after the end of that financial year, or the day you file the annual return, whichever comes first.
- If you do not pay your supplier within 180 days of the invoice date, you must give the credit back with interest. You can take it again once you pay.
- Food, health insurance for staff, club memberships, cars for personal transport, building construction and free samples are common blocked items.
In this guide
What is input tax credit, in plain words?
When you buy something for your business, the supplier charges you GST. When you sell, you collect GST from your buyer. Input tax credit lets you subtract the first from the second, so you pay the Government only the difference. The rule exists so that tax is charged on the value you add, not on the full price again at every stage.
Which conditions must you meet?
Section 16(2) lists them.
| Condition | What it means for you |
|---|---|
| You are registered and the purchase is for business | Personal purchases billed to your GSTIN do not qualify. |
| You hold a tax invoice or debit note | It must carry your GSTIN, the supplier's GSTIN, the tax amount and a description. A screenshot of an order page is not an invoice. |
| The supplier has reported the invoice in GSTR-1 | That is how it reaches your GSTR-2B, the monthly credit statement on the portal. No entry in GSTR-2B, no credit for now. |
| You have received the goods or service | If goods arrive in lots, credit comes when the last lot arrives. |
| The tax has been paid to the Government | If your supplier never files GSTR-3B, your credit is at risk. |
| You have filed your own GSTR-3B | Credit is taken through the return, not outside it. |
Two more rules sit beside these. If you claim depreciation on the GST part of a capital asset in your income tax books, you cannot also claim that GST as credit. And if you use a purchase partly for exempt sales or partly for personal use, only the business and taxable share counts.
What is the time limit to claim?
Section 16(4) gives you until 30 November following the end of the financial year to which the invoice belongs, or the date you actually file the annual return for that year, whichever is earlier. For an invoice dated in 2025-26, that means 30 November 2026 at the latest. In practice the credit has to sit in a GSTR-3B filed by that day, so the October return filed in November is your last real chance.
Miss that date and the credit is gone for good. No later return, and no annual return, can bring it back.
When must you give credit back?
- You have not paid the supplier in 180 days. You must pay back the credit, in proportion to the unpaid amount, with interest, in the GSTR-3B that follows the 180th day. Once you pay the supplier, you can take the credit again.
- Your supplier never filed GSTR-3B. Under rule 37A, if the supplier has still not filed the matching GSTR-3B by 30 September after the financial year, you must reverse that credit by 30 November. If the supplier files later, you can claim it again.
Which credits are blocked under section 17(5)?
These purchases carry no credit even when every condition above is met. The idea is that they are too close to personal use, or they create an asset outside the GST chain.
| Blocked item | Main exception |
|---|---|
| Cars and other passenger vehicles seating up to 13 people, with their insurance and repairs | Allowed if you resell vehicles, carry passengers or run a driving school. A goods vehicle is not on the blocked list. |
| Food and beverages, outdoor catering, beauty treatment, health services, life and health insurance | Allowed if you sell the same kind of supply, or if a law obliges you as an employer to provide it. |
| Club, gym and fitness centre memberships; holiday travel for employees | Allowed only where a law obliges the employer to provide it. |
| Works contract and materials for constructing a building or other immovable property for yourself | Plant and machinery is not blocked. |
| Purchases from a composition dealer | None. |
| Corporate social responsibility spending; personal consumption | None. |
| Goods lost, stolen, destroyed, written off, or given as gifts or free samples | None at present. |
| Tax paid after a fraud demand, or on detained and confiscated goods | None. |
One change may be coming. At its 57th meeting on 8 October 2026 the GST Council recommended removing the block on outdoor catering, health and life insurance, free samples and goods destroyed at shelf-life expiry as required by law. That is a recommendation only. Until Parliament amends the Act, the table above is the law you file under.
A worked example
Take a seller of kitchenware on two marketplaces. In one month the purchase invoices show this GST:
- Marketplace commission and shipping fees: Rs 5,400
- A laptop for the office: Rs 10,800
- Health insurance for three employees: Rs 3,600
- Catering for a team lunch: Rs 900
- Cartons from a supplier who has not yet filed GSTR-1: Rs 2,700
Total GST paid is Rs 23,400. The credit you can take this month is Rs 5,400 plus Rs 10,800, which is Rs 16,200. The insurance and catering, Rs 4,500 together, are blocked and become a cost. The Rs 2,700 on cartons is not lost. It waits until the supplier files and the invoice appears in your GSTR-2B. If your sales tax for the month is Rs 40,000, you pay Rs 23,800 in cash instead of Rs 40,000.
The usual mistake
The common error is to claim whatever GSTR-2B shows. GSTR-2B tells you what your suppliers reported. It does not judge whether a purchase is blocked or personal. A phone bought for your family on your GSTIN, a hotel dinner or a gym membership will all appear there, and none of them is good credit. The opposite error is just as costly: leaving genuine credit unclaimed until the 30 November date has passed. Marketplace fee invoices are the ones sellers miss most, and our article on credit for Amazon and Flipkart commission shows where to find them.
Should you handle this yourself?
If you buy from a handful of suppliers and sell only taxable goods, a monthly match of GSTR-2B with your purchase bills is enough, and you can do it. Get help if you also sell exempt goods, have bought a vehicle or done construction, or have received a notice in form DRC-01C saying your credit is higher than GSTR-2B. Our guide to GSTR-3B for online sellers shows where each credit figure goes in the return.
Sources
- Section 16, CGST Act: eligibility, conditions and time limit for input tax credit (cggst.com copy) (checked 12 Nov 2026)
- Section 17, CGST Act: apportionment of credit and blocked credits (cggst.com copy) (checked 12 Nov 2026)
- Rule 37, CGST Rules: reversal when the supplier is not paid in 180 days (cggst.com copy) (checked 12 Nov 2026)
- Rule 37A, CGST Rules: reversal when the supplier does not file GSTR-3B (cggst.com copy) (checked 12 Nov 2026)
- Press release, 57th GST Council meeting, 8 October 2026 (GST portal copy) (checked 12 Nov 2026)
- CBIC tax information portal: section 16 (official text; not opened on 12 Nov 2026)
- CBIC tax information portal: section 17 (official text; not opened on 12 Nov 2026)
How AprilTax can help
If you would like a second pair of eyes on your credit each month, a Tax Expert at AprilTax can file your GSTR-1 and GSTR-3B for Rs 499 a month, or Rs 1,399 a quarter for quarterly filers. That includes matching your purchase invoices with GSTR-2B and keeping blocked items out of the claim. See GSTR filing by a Tax Expert.
Frequently asked questions
What are the conditions to claim input tax credit under GST?
What is the last date to claim ITC for a financial year?
What is blocked credit under section 17(5)?
Can I claim ITC if the invoice is not in GSTR-2B?
What happens if I do not pay my supplier within 180 days?
Is GST on a car or a delivery van available as credit?
Can I claim credit on free samples and gifts I send to customers?
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