Input Tax Credit (ITC) – Claim & Reconciliation Under GST
Need to Update
- No Hidden Charges
- Lowest Price Guarantee
No Hidden Charges
Lowest Price Guarantee
Four Steps to Get Your Incorporation Certificate
Fill the Form
Provide business details
Add to cart
Pay the required fee online
Submit Documents
Upload required papers
Certificate delivery
Official Document Delivery
Find the best plan for your needs
Basic Plan
+GST
- Company Name Approval
- DIN for 2 Directors
- DSC for 2 Directors
- Company Incorporation Certificate
- AOA & MOA
- Company E-PAN & E-TAN
- Company Master Data
- Current Account Opening Support
- Electronic Certificate Delivery
Standard Plan
+GST
Basic Plan
+
- MSME/Udyam Registration
- INC-22 Filing
- Issuance of share certificates
- Hard Copy Certificate Delivery
Premium Plan
+GST
Standard Plan
+
- Auditor Appointment
- INC 20 A Filing
- Trade License
- Shops & Establishment License
- GST Registration
- Business Letterhead (10 copies)
- Company Seals
What is Input Tax Credit
Input Tax Credit (ITC) allows businesses to reduce their tax liability by claiming credit for the GST paid on purchases of goods or services used for business. It ensures that tax is applied only on the value added at each stage, preventing double taxation.
Why is ITC Important?
✔ Reduces tax burden by offsetting GST paid on purchases.
✔ Improves cash flow by allowing tax adjustment.
✔ Prevents double taxation by ensuring GST is only charged on value addition.
Latest GST Update (2024) – ITC can only be claimed if it appears in GSTR-2B (auto-generated ITC statement). This makes ITC reconciliation essential before filing GST returns.
Need to Update
Need to Update
Process to Claim ITC
Need to update
- Log in to the GST portal and download GSTR-2B.
- Ensure the supplier has filed GSTR-1, and the invoice appears in GSTR-2B.
New Rule: ITC that does not appear in GSTR-2B cannot be claimed.
- Compare purchase invoices with GSTR-2B.
- Identify missing, incorrect, or excess ITC claims.
Common Issues:
- Invoice missing in GSTR-2B? → Supplier hasn’t filed GSTR-1.
- Mismatch in GSTIN, invoice amount, or tax details? → ITC may be rejected.
Action Required: Contact suppliers and ask them to correct their GSTR-1 filings.
- Enter eligible ITC details in Table 4 of GSTR-3B.
- Report ineligible or blocked ITC separately.
Common Mistake: Claiming ITC on ineligible expenses such as personal purchases, blocked credits, or non-business expenses.
Penalty: Incorrect ITC claims can lead to interest and penalties.
- If you paid GST under RCM (Reverse Charge Mechanism), you can claim ITC only after paying tax in cash via GSTR-3B.
- RCM ITC cannot be claimed in the same month if the tax has not been paid.
Common Mistake: Not reporting RCM transactions separately, leading to tax notices.
Tip: Always verify RCM transactions before filing GSTR-3B.
Note: Need to Update
Common Mistakes to Avoid in ITC Claims
Need to Update
Not Checking GSTR-2B Before Claiming ITC
ITC can be rejected if it doesn’t match supplier records.
Claiming ITC on Blocked Items
ITC on ineligible expenses (like entertainment, personal use) leads to penalties.
Late ITC Claims
ITC must be claimed before the deadline, or it cannot be recovered.
Not Reconciling ITC with Supplier Invoices
Mismatched invoices may be denied ITC during audits.
Not Reporting RCM Transactions Separately
This can lead to compliance issues and tax penalties.
Note: Conduct a monthly ITC reconciliation to catch errors early.
ITC Reconciliation
ITC reconciliation ensures that the ITC claimed matches the invoices reported by suppliers in GSTR-2B.
Frequently Asked Questions
Note: Businesses can automate compliance & save time using e-Invoicing software.
