GST Input Tax Credit Calculator

Input Tax Credit (ITC) is the GST you paid on purchases, which you can deduct from the GST you collect on sales. It prevents a cascading tax effect — tax on tax — and is the core mechanism that makes GST a 'destination-based consumption tax.' Without ITC, you'd be paying tax on the full selling price, including the tax embedded in your input costs.

ITC is not an automatic right. It must be claimed correctly, supported by valid tax invoices from registered suppliers, and reconciled in your GSTR-2A/2B. Incorrect ITC claims are the #1 reason for GST notices and audits.

Under Section 17(5) of the CGST Act, ITC is blocked (not available) for certain goods and services regardless of the invoice:

• Motor vehicles (except for certain specified businesses like transportation, dealerships, etc.).
• Food and beverages, outdoor catering, beauty treatment, health services, and membership fees.
• Rent-a-cab, life insurance, and health insurance (unless required by law).
• Goods or services used for personal consumption of the employees or directors.
• Goods lost, stolen, destroyed, written off, or gifted as free samples.
• Goods or services used for effecting exempt supplies.
• Purchases from composition dealers or unregistered dealers (with exceptions under RCM).

ITC claimed in a previous period may need to be reversed (paid back) in certain situations:

Exempt supply reversal (Rule 42)

If goods/services on which ITC was claimed are later used for exempt supplies, the proportionate ITC must be reversed. Calculated as: ITC × (exempt turnover / total turnover).

Non-payment to supplier within 180 days

If you don't pay the supplier within 180 days of the invoice date, ITC claimed must be reversed (with interest). It can be reclaimed when payment is actually made.

Credit note from supplier

If the supplier issues a credit note reducing the invoice value, the excess ITC must be reversed.

Annual ITC reconciliation

At year-end, ITC claimed must match the supplier's GSTR-1/2A. Any excess must be reversed in the annual return (GSTR-9).

Under RCM, the buyer pays GST directly to the government instead of the supplier. Key cases:

• Purchases from unregistered dealers (specified goods/services).
• Import of services.
• Goods Transport Agency (GTA) services.
• Legal services by advocates.
• Sponsorship services.
• Director's services.

Under RCM, you pay GST on behalf of the supplier AND you can claim ITC for the same amount (if the goods/services are used for business). Most businesses miss claiming ITC on RCM payments — check your GSTR-3B to ensure you're not leaving this credit unclaimed.

1. Only buy from GST-registered suppliers who issue proper tax invoices.
2. Ensure your vendor has filed GSTR-1 — only invoices in your GSTR-2B are eligible.
3. Reconcile purchase register with GSTR-2A/2B every month before filing GSTR-3B.
4. Track the 180-day payment rule and pay suppliers within the window.
5. Separate personal and business purchases for employees claiming reimbursement.
6. Maintain a proper ITC register with invoice-wise details to survive a GST audit.