Claiming Input Tax Credit (ITC) in GSTR-2B involves reconciling your purchase register with the auto-drafted statement on the GST portal and reporting the eligible amount in Form GSTR-3B. ITC must only be claimed for invoices appearing in GSTR-2B, ensuring compliance with Section 16(2)(aa).
Since the data in GSTR-2B does not change with subsequent supplier filings, it provides a stable reference point for reconciling ITC claims with purchase records. This stability is crucial for accurate monthly tax filings and reduces the chances of discrepancies that could lead to tax notices.
Step-by-step guide to claiming ITC and reporting in GSTR-3B
File Form 5695, Residential Energy Credits with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not merely purchased.
Section 16(2)(aa) of the GST Act ensures that Input Tax Credit (ITC) can only be claimed if the supplier has uploaded the invoice in their GSTR-1 return and it reflects in the recipient's GSTR-2B. This rule was introduced to prevent fake claims, encourage supplier compliance, and maintain transparency.
Further, the matching may result in documents missing in either of the data. If there are invoices or debit notes missing in GSTR-2B when compared to the purchase register, the taxpayer must inform his suppliers about the same and get the document uploaded in the next GSTR-1 return they are filing.
When a supplier uploads an invoice in GSTR-1 or IFF, it appears on your IMS dashboard. If the invoice has issue, you have the option to review and reject it. Once rejected, it is marked as “ITC Rejected” in your GSTR-2B, ensuring that the Input Tax Credit (ITC) from that invoice is excluded from your monthly return.
Time Limits for Claiming ITC
If the supplier has paid the tax on the supply, you have up to 12 months from the date of supply to claim ITC. If the supplier has not paid the tax on the supply, you have up to 36 months from the date of supply to claim ITC.
Claiming the ITC is easy. To get started, you'll first need your standard IRS 1040 Form, IRS Form 5695, "Residential Energy Credits," and the instructions for Form 5695. The purpose of Form 5695 is to validate your qualification for renewable energy credits.
GST/HST must have been paid or payable by you in respect of the supply, importation, or bringing in of the property or service. You obtain sufficient documentary evidence to substantiate the ITC prior to making the claim in a GST/HST return. For more information, see Records you need to support your claim.
What is ineligible for Input Tax Credit? Under Section 17(5) of the CGST Act, you can't claim credit for GST paid on personal vehicles, food, club fees, life/health insurance (unless required by law), building construction, or lost/damaged goods.
Most registrants claim their input tax credits (ITCs) and input tax refunds (ITRs) when they file their GST and QST returns for the reporting period during which the purchases were made. However, you generally have four years in which to claim your ITCs and ITRs for a given reporting period.
GSTR-2A is a dynamic purchase-related tax statement, while GSTR-2B is a static monthly ITC statement. GSTR-2B helps businesses identify eligible ITC, whereas GSTR-2A keeps updating as suppliers upload invoices. ITC claims should be aligned with GSTR-2B, not GSTR-2A.
Login to GSTZen account and select the GSTIN in the Dashboard for which you want to perform the reconciliation. Click on Reconcile Books vs Govt. Portal Data, then select “Purchase Register vs GSTR-2B” and the relevant period. Step 1: Log in to the GST Portal, either through OTP or Username and Password.
ITC is a mechanism to avoid cascading of taxes. Cascading of taxes, in simple language, is 'tax on tax'. Under the present system of taxation, credit of taxes being levied by Central Government is not available as set-off for payment of taxes levied by State Governments, and vice versa.
ITC Claim Process: How to Claim Input Tax Credit
Obtain a Valid GST Invoice: Ensure that all business purchases are supported by a valid tax invoice, debit note or bill of entry to show that GST has been paid. ITC cannot be asserted without these documents.
Four Core Rules: You can only claim a credit if the purchase is for your business, the price included GST, you hold a valid tax invoice, and the supplier is GST-registered.
Accordingly, a taxpayer can claim ITC only if the same appears appears in their GSTR-2B. Hence, no provisional ITC can be claimed from 1st January 2022 onwards. Hence, matching of the purchase register with the GSTR-2B is crucial for ITC claims.
Primary Time Limit Rule
For invoices issued in FY 2024-25, the last date to claim ITC is 30th November 2025 (assuming annual returns are filed by that date).
Input Tax Credits may only be claimed via ISD
From 1 April 2025, the Indian government has made it mandatory for businesses to use the Input Service Distributor (ISD) mechanism to claim Input Tax Credit (ITC) under the Goods and Services Tax (GST) system.
Limit on ITC availment under Rule 36(4) – The purpose of GSTR 2B is to ensure compliance with Rule 36(4). Once GSTR 2B is made mandatory, availment of ITC by a Tax payer for invoices not uploaded by Vendors cannot exceed by more than 10%, the Input Tax Credit for invoices uploaded by Vendors in their GSTR 1 Returns.
Your accountant or bookkeeper is the best person to contact to ask what you currently claim as your ITC percentage.
Step 6 – Raise Ticket: The taxpayer can raise a ticket on the GST self-service portal or GST helpdesk if the portal does not display the BoE in case they face any problem. The following details are to be furnished in the ticket: BoE details – GSTIN, BoE number, BoE date, Port code and Reference date.