ITC Rejected in GSTR-2B refers to invoices, debit notes, or credit notes that a recipient taxpayer has intentionally marked as "Rejected" within the Invoice Management System (IMS) dashboard. These transactions are excluded from the auto-populated Input Tax Credit (ITC) available in GSTR-3B because they are deemed incorrect, invalid, or do not belong to the business.
Even if your supplier has filed GSTR-1, sometimes the invoice doesn't appear in your GSTR-2B due to incorrect GSTIN, invoice number, or date mismatches. GSTN now relies solely on GSTR-2B (not GSTR-2A) for ITC eligibility, meaning if the invoice is missing, ITC is automatically rejected.
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.
Wrongly rejected an invoice on IMS? Don't lose your Input Tax Credit. As per GSTN's June 2025 advisory, ask your supplier to re-furnish the invoice in GSTR-1A or amendment table, accept it on IMS, recompute GSTR-2B and claim your full ITC.
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.
ITC is not available for goods that are lost, stolen, destroyed, written off, or given as gifts or free samples. Businesses must account for such scenarios in their records, acknowledging the ineligibility of ITC on these items.
ITC is blocked on goods or services that are seized or confiscated due to tax-related offenses. Credits are denied when goods or services are involved in willful misrepresentation or suppression of facts. ITC is ineligible when goods are used in violation of GST laws or if they are seized in fraudulent activities.
Steps to Re-Download GSTR-2B in GSTZen
Interest and Penalty on ITC Reversal If ITC is wrongly availed or utilized, it must be reversed with interest under Section 50. The applicable interest is typically 24% per annum from the date of wrongful availment till reversal.
Navigate to Services > User Services > My Applications > Application Type as Appeal to Appellate Authority > NEW APPLICATION button. Select the Order Type as Registration Order from the drop-down list and mention the relevant Order number and click on Search.
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.
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.
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.
Step-by-step guide to generating ITC in GSTR-2B
Reversing ITC When a Valid Credit Note Was Rejected
The information in GSTR-2B helps businesses verify the ITC available to them based on the purchases recorded by their suppliers. By reconciling GSTR-2B with purchase invoices, businesses can ensure accurate claiming of ITC, prevent errors, and avoid potential penalties for incorrect claims.
Within 180 days from the date of issue of the invoice. On or before 30th November of the following financial year.
The registered business/entity has to pay the correct GST and get a refund for the wrong GST paid. No penalty under GST Act for incorrect filing of GST returns but interest at the rate of 18% p.a. is chargeable on the tax amount shortfall. No penalty is applicable for delayed invoice payments.
For most registrants, ITCs must be claimed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the ITCs could have first been claimed.
GSTR-2B is an auto-generated statement that provides details of eligible and ineligible ITC for a taxpayer based on the invoices uploaded by their suppliers. The introduction of IMS has strengthened the connection between supplier and recipient data, ensuring that GSTR-2B reflects the most accurate ITC details.
When Is GSTR-2B Generated? GSTR-2B is generated after furnishing details of GSTR-5, GSTR-6, and IFF (Invoice Furnishing Facility) which is due by 13th of every month. This means that GSTR-2B can be accessed on or after 14th of every month. Normal taxpayers and SEZ can access this statement and download the same.
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.
- 2025-TIOL-77-SC-VAT.
The Bench of Justices Manoj Misra and N.K. Singh reaffirmed a core proposition of fiscal fairness: a purchaser who has paid tax in good faith to a registered seller cannot be denied Input Tax Credit (ITC) merely because the seller fails to deposit that tax with the Government.
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.
The reversal is calculated using the following formula. Example: If the buyer claimed ₹50,000 as ITC on a purchase, and the supplier failed to pay GST for 2 months out of 12 months, the ITC reversal would be calculated proportionately. As a result, the buyer must reverse ₹8,333 of the claimed ITC.