The five conditions in section 16(2)
You can claim ITC on a purchase only when all of these are true:
- You hold a tax invoice or debit note issued by a registered supplier (section 16(2)(a)).
- The invoice appears in your GSTR-2B, because the supplier reported it and you did not reject it in IMS (section 16(2)(aa)).
- You have received the goods or services (section 16(2)(b)). For goods in lots, credit comes with the last lot.
- The supplier has paid the tax to the government (section 16(2)(c)).
- You have filed your return under section 39, that is, your GSTR-3B (section 16(2)(d)).
Time limits
| Rule | Source | What it means |
|---|---|---|
| Last date to claim | Section 16(4) | 30 November after the end of the financial year, or the date of filing the annual return, if earlier. ITC for FY 2026-27 must be claimed by 30 November 2027. |
| Pay the supplier within 180 days | Section 16(2) second proviso, Rule 37 | If you do not pay the value plus tax within 180 days of the invoice date, reverse the ITC with interest; you can claim it again when you pay. |
| Supplier did not file GSTR-3B | Rule 37A | If the supplier has not filed GSTR-3B for the period by 30 September of the next year, reverse the ITC by 30 November; claim it again after the supplier files. |
| GSTR-2B excess | Rule 88D | ITC in GSTR-3B above GSTR-2B by more than ₹25 lakh and 20% leads to a DRC-01C intimation. |
The 180-day rule does not apply to tax paid on reverse charge, to supplies on which tax is paid under reverse charge, or to the additional value added under the valuation rules, such as perquisites.
Worked example: the 180-day rule
An illustration. A purchase invoice dated 10 April 2026 is for ₹1,00,000 plus ₹18,000 GST. ITC of ₹18,000 was claimed in April’s GSTR-3B. By 7 October 2026, the 180th day, the invoice is still unpaid.
| Step | Working | Amount (₹) |
|---|---|---|
| Reverse ITC in GSTR-3B for October 2026 | Full tax on the unpaid invoice | 18,000 |
| Interest on the reversed ITC | Payable under section 50, from the date of claim | Depends on days; at 18% a year on ₹18,000, about ₹9 a day |
| Pay the supplier in December 2026 | Claim the ITC again in December’s GSTR-3B | + 18,000 |
For a part payment, the reversal is proportionate to the unpaid share. A purchase ledger that shows invoices approaching 180 days is the cheapest control.
Blocked credits under section 17(5)
Some purchases never give credit, even with a perfect invoice. The main ones:
- Motor vehicles for transporting people with up to 13 seats (including the driver), and their repairs and insurance, unless used for further supply of vehicles, passenger transport, or training in driving.
- Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, unless used for the same kind of supply or required by law to be provided to employees.
- Membership of a club, health or fitness centre; travel benefits to employees on vacation such as leave travel.
- Rent-a-cab, life insurance and health insurance, with the same exceptions as above.
- Works contract services and goods or services used to construct immovable property on your own account (other than plant and machinery), even when capitalised.
- Goods lost, stolen, destroyed, written off, or given as gifts or free samples.
- Goods or services used for personal consumption.
- Tax paid under composition, and tax paid on demands in fraud cases (section 74, and its counterpart for later periods).
Credit also has to be split under section 17(2) and Rules 42 and 43 when a purchase is used partly for exempt supplies or non-business purposes.
Check before you claim
- Is the invoice in GSTR-2B, and did you accept it in IMS? See IMS and GSTR-2B reconciliation.
- Have the goods actually arrived, or the service been performed?
- Is the purchase in the blocked list, or used partly for exempt supplies?
- Is any invoice close to 180 days unpaid?
- Has every supplier filed GSTR-3B for the period? Check supplier filing status before paying large invoices.
- Is the claim within the section 16(4) deadline? See the GST due dates calendar.
Doing this in software
In SME ERP, purchase invoices carry GSTIN and tax, ineligible ITC can be marked on the invoice, and the India Compliance app reports ITC availed and matches purchases with GSTR-2B. Accounts-payable ageing shows invoices nearing 180 days. The glossary entry on ITC is a one-paragraph explainer to share with your team.
Frequently asked questions
What are the conditions to claim input tax credit?
Under section 16(2), you need a tax invoice, the invoice must appear in your GSTR-2B, you must have received the goods or services, the supplier must have paid the tax and you must have filed your GSTR-3B.
What is the time limit to claim ITC?
30 November after the end of the financial year, or the date of filing the annual return if earlier, under section 16(4).
What is the 180-day rule for ITC?
If you do not pay a supplier the value and tax within 180 days of the invoice, you must reverse the ITC with interest. You can claim it again when you pay.
Can I claim GST on a car purchase?
Not for motor vehicles carrying up to 13 people, unless you use them to supply vehicles, transport passengers or train drivers. This is blocked under section 17(5).
Practical, India-specific guides from the team behind WebSoftOS cloud ERP, by Ridhi Technologies, Zirakpur, Punjab.