ITC (Input Tax Credit)

Input Tax Credit (ITC) is one of the most important concepts in GST. It allows businesses to reduce their GST liability by claiming credit for the tax already paid on inputs (purchases, raw materials, and services used in the business).

How ITC works:

• You pay GST on purchases (input tax)
• You collect GST on sales (output tax)
• You deposit only the difference (output tax - input tax) to the government
• If input tax exceeds output tax, the excess can be carried forward or refunded

Conditions for claiming ITC:

• You must have a valid tax invoice
• You must have received the goods or services
• The supplier must have filed their return and paid the tax
• The invoice must appear in your GSTR-2B
• You must file your own returns on time

ITC at risk: Any mismatch between your purchase register and GSTR-2B puts your ITC at risk. Common causes include supplier GSTIN errors, invoice number mismatches, amount rounding differences, and suppliers not filing returns.