Input tax credit basics

How credit works

When you buy goods or services for your business, your supplier charges you GST. When you sell, you charge GST to your customer. You pay the government the difference: the tax on your sales minus the credit on your purchases.

Credit sits in a ledger on the GST portal, split by tax type. You use it to pay tax, and the law sets the order in which each type of credit can be used.

The usual conditions

• You hold a valid tax invoice or a similar document from your supplier.
• You have received the goods or services.
• The supplier has reported the invoice in their own return, so it shows for you on the portal.
• The tax has been paid to the government by the supplier.
• You have filed your return.

Time limits apply to claiming credit, and they are set in the law. Check the current rule on the portal or with your accountant.

Credit you cannot claim

Some purchases are blocked from credit by the law, for example goods or services used for personal consumption, and certain categories of spending that the law lists. Credit also has to be reduced or reversed when you use a purchase partly for exempt supplies, or when you do not pay the supplier in time.

Check before you claim

Compare the credit you plan to claim with what the portal shows for your registration, and chase suppliers whose invoices are missing. Claiming credit you are not entitled to can bring interest and a penalty.

How Bahi Khata helps

Bahi Khata works out the input tax credit table of its GSTR-3B worksheet from your purchase bills, for you to check. It does not import GSTR-2B, so match your credit against GSTR-2B on the portal yourself.

GST returns

Official sources

• GST portal: returns user guide
• CGST Act, 2017 (CBIC consolidated copy)
• CGST Rules, 2017, Part A (CBIC)

Related guides

• GSTR-3B explained
• GST invoice rules

Questions