What are the conditions to claim input tax credit under GST and what is the time limit?
GradeHunt_TeamGradeHunt Team ·
I just started working at a small CA firm and clients keep asking why their ITC is being disallowed even though they have the bill. What are all the conditions to claim ITC under Section 16, and till when can we claim ITC for invoices of last year?
input tax creditsection 16 cgstgstr-2bitc time limit
1 answer
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Having the tax invoice is only one of the conditions. Under Section 16 of the CGST Act, a registered person can take ITC on goods or services used, or meant to be used, in the course or furtherance of business, only when ALL of these are met:
1. The recipient has the tax invoice or debit note (Section 16(2)(a)).
2. The supplier has reported that invoice in their GSTR-1 (or IFF), and it is communicated to the recipient, which in practice means it appears in the recipient's GSTR-2B (Section 16(2)(aa)).
3. The recipient has actually received the goods or services. Goods delivered to a third party on his direction count as received (Section 16(2)(b)).
4. The credit has not been restricted in the details communicated to the recipient under Section 38 (Section 16(2)(ba)).
5. The supplier has actually paid the tax to the Government (Section 16(2)(c)).
6. The recipient has filed their own return under Section 39, that is GSTR-3B (Section 16(2)(d)).
Two more rules people miss:
- Goods received in lots or instalments: ITC is available only when the last lot is received.
- 180-day payment rule: if the recipient does not pay the supplier the value plus tax within 180 days from the invoice date, the recipient must pay back an amount equal to the ITC taken, with interest under Section 50, by reversing it in GSTR-3B for the period right after the 180 days end (Rule 37). Once the supplier is paid, the credit can be taken again. This rule does not apply to supplies taxed under reverse charge.
Time limit (Section 16(4)): ITC for an invoice or debit note cannot be taken after 30 November following the end of the financial year it relates to, or after filing the annual return for that year, whichever is earlier.
Example: an invoice dated 15 February 2026 belongs to FY 2025-26. The last date to claim it is 30 November 2026. If the client files the annual return for FY 2025-26 earlier, say on 31 October 2026, the window closes on that date.
Also check that the credit is not blocked under Section 17(5), for example motor vehicles that carry up to 13 people including the driver (unless used for specified purposes such as further supply or passenger transport), food and beverages, and goods lost, stolen, destroyed or given away as gifts or free samples.
When a client's ITC is disallowed despite having the bill, the usual reasons are condition 2 (supplier did not file GSTR-1, so the invoice is not in GSTR-2B) or condition 5.
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