Input tax credit (ITC)
What is Input tax credit? Tax you paid on purchases, which you can set off against the tax you owe on sales, as long as your supplier has filed and the invoice matches.
In plain words
when you buy something for your business, the supplier's invoice carries GST. If you are registered, that GST is not a cost to you. You subtract it from the GST you collected on your sales and pay the government only the difference.
That subtraction is input tax credit, or ITC. It is real cash, and it depends on your supplier having filed their own return.
A worked example
| Line | Taxable value | GST at 18% |
|---|---|---|
| Sales in the month (output tax) | ₹10,00,000 | ₹1,80,000 |
| Purchases in the month (all invoices) | ₹6,00,000 | ₹1,08,000 |
| Of which: one supplier has not filed, so the invoice is missing from GSTR-2B | ₹1,00,000 | ₹18,000 |
| Credit you can claim now (₹1,08,000 less ₹18,000) | ₹90,000 | |
| Tax to pay in cash (₹1,80,000 less ₹90,000) | ₹90,000 |
The ₹18,000 is not lost for good. You can usually claim it in a later month once the supplier files and the invoice appears in GSTR-2B, but the law sets a time limit. The 18 per cent rate is only for illustration. Confirm rates, eligibility and time limits with your CA.
Why it matters
- Cost. In the example, one late supplier makes you pay ₹18,000 more in cash this month.
- Deadline. As the rules stand now, the credit you claim in your return is limited to what GSTR-2B shows, and a claim has a time limit.
- Risk. Not every purchase qualifies; some credits are blocked by law. A wrong claim can bring a notice, interest or a reversal.
How Kinnow handles it
Kinnow matches your purchase bills against GSTR-2B and puts the differences in front of a person.
- Matching. Each bill in your books is compared with the GSTR-2B lines by supplier GSTIN and invoice number. A bill lands as matched, partly matched (within a small tolerance, 2 per cent by default), missing in GSTR-2B because the supplier has not filed, or missing in your books because you have not entered it.
- Your own decisions are counted. Lines you rejected or held back in the portal's invoice management system are set apart. The credit Kinnow shows as claimable is the sum of the matched and partly matched lines.
- Chasing suppliers. The Mismatch Detector flags differences for a person. A separate agent drafts one reminder per supplier, and a person approves it before it goes.
- Ordering. GSTR-1 and GSTR-3B wait for that month's GSTR-2B reconciliation. This order is flagged for your CA to confirm.
The honest limit. Kinnow prepares and matches; your team claims the credit in the return and files on the portal. Bringing GSTR-2B in straight from the portal depends on the GST connection set up for your company, which is still in pilot. The matching rules are settings your CA should confirm.
Send us one month of purchase bills and your GSTR-2B. We will show the matches and the gaps.
Related terms
- GSTR-2B: the statement your credit is checked against.
- GSTR-3B: the return where you claim it.
- GST: the tax behind the credit.
- IRN e-invoice: what your larger suppliers must report.
Questions
Can I claim input tax credit if my supplier has not filed?
Generally not yet. The credit depends on the invoice appearing in your GSTR-2B, which is built from what your supplier files. You can usually claim it in a later month once it appears, within the time limit. Confirm the details with your CA.
Is input tax credit available on every purchase?
No. Some purchases are blocked by law, and credit applies only to purchases used for your business. Your CA can tell you which of your purchases qualify.
What does Kinnow do about a mismatch?
It flags the difference and shows the reason. A drafted supplier reminder goes out only after a person approves it. Kinnow does not claim the credit or file the return by itself.
Want fewer surprises when GSTR-2B arrives? Request a demo and we will run the match on your own bills.