What are the conditions to claim input tax credit?
The four conditions in section 16 of the CGST Act for claiming input tax credit, the invoice and receipt tests, the GSTR-2B and supplier-payment rules, the 180-day payment condition, and the time limit to claim.
In this guide
Section 16 of the CGST Act lets a registered person claim input tax credit on inputs used for business, subject to four conditions: possession of a tax invoice or debit note, receipt of the goods or services, that the tax was actually paid to the government, and that the return has been furnished. The credit must also appear in GSTR-2B, the supplier must be paid within 180 days, and the credit for a financial year must be claimed by the deadline of 30 November following the year or the annual return date, whichever is earlier.
What does section 16 allow?
Section 16 of the CGST Act is the gateway to input tax credit. It lets a registered person take credit of the tax paid on inputs, input services, and capital goods used or intended to be used in the course or furtherance of business, and credits that amount to the electronic credit ledger.
The entitlement in section 16(1) is wide, but section 16(2) attaches conditions, and section 17 blocks credit on specific supplies. So the right to credit is real but fenced by tests that all have to be met.
What are the four conditions?
Section 16(2) sets four conditions that must all be satisfied before credit is admissible for a supply. Missing any one blocks the credit for that invoice.
| Condition | Clause |
|---|---|
| Possess a tax invoice or debit note | Section 16(2)(a) |
| Invoice details communicated in GSTR-2B | Section 16(2)(aa) |
| Received the goods or services | Section 16(2)(b) |
| Tax actually paid to the government | Section 16(2)(c) |
| Return under section 39 furnished | Section 16(2)(d) |
Must the credit show in GSTR-2B?
Yes. Section 16(2)(aa) requires the details of the invoice or debit note to have been furnished by the supplier and communicated to the recipient. In practice this means the credit must appear in the recipient's GSTR-2B, which is generated from the suppliers' outward returns.
A supplier who has not reported the invoice therefore blocks the recipient's credit, however genuine the purchase. For how that matching works in practice, read our GSTR-2B and ITC matching guide.
What is the 180-day payment rule?
The second proviso to section 16(2) ties credit to paying the supplier. If the recipient does not pay the value of the supply along with the tax within 180 days of the invoice date, an amount equal to the credit taken is added to the output tax liability, with interest.
The credit is not lost for good. Once the payment is made, the recipient can reclaim the credit, so the rule works as a reversal followed by a reclaim rather than a permanent denial.
What is the time limit to claim ITC?
Section 16(4) sets the outer limit. Credit for an invoice or debit note of a financial year must be taken by 30 November following the end of that year, or the date of furnishing the annual return for that year, whichever is earlier.
Credit claimed after that date is time-barred for that year. For the detail of how that deadline is applied, read our GST ITC time limit guide.
How do I confirm a credit is eligible?
- Check all four section 16(2) conditions are met for the invoice under section 16.
- Confirm the credit appears in the period's GSTR-2B.
- Check the supply is not blocked under section 17(5).
- Confirm the supplier will be paid within 180 days of the invoice.
- Take the credit before the section 16(4) deadline for the year.
Why do ITC claims get reversed?
- Claiming credit not reflected in GSTR-2B under section 16(2)(aa).
- Taking credit on the invoice before the goods are received.
- Missing the 180-day supplier payment and not reversing the credit.
- Claiming a blocked credit under section 17(5).
- Claiming after the section 16(4) deadline for the financial year.
Where are ITC rules published?
The credit conditions sit in section 16 of the CGST Act, the blocked list in section 17(5), and the reversal mechanics in rule 37 and related rules, with CBIC circulars clarifying the matching and reversal position. For the blocked-credit side, read our GST blocked credits guide. Complied AI keeps CBIC / GST updates in one feed so you can open the circular behind an ITC change and read section 16 next to it.
Practical checks
Common questions
What are the conditions to claim input tax credit?
Section 16(2) sets four: the registered person must possess a tax invoice or debit note, must have received the goods or services, the tax charged must have been actually paid to the government, and the return under section 39 must have been furnished. All four must be met before the credit is admissible for that supply.
Does input tax credit have to appear in GSTR-2B?
Yes. Section 16(2)(aa) requires the details of the invoice or debit note to have been furnished by the supplier and communicated to the recipient, which happens through GSTR-2B. Credit not reflected in GSTR-2B is not admissible, so a supplier who has not reported the invoice blocks the recipient's credit.
What is the 180-day rule for input tax credit?
Under the second proviso to section 16(2), if the recipient does not pay the supplier the value of the supply plus the tax within 180 days of the invoice date, the credit taken is added to output tax liability with interest. The credit can be reclaimed once the payment is made, so it is a reversal-and-reclaim rule, not a permanent loss.
What is the time limit to claim input tax credit?
Under section 16(4), credit for an invoice or debit note of a financial year must be taken by 30 November following the end of that financial year, or the date of furnishing the annual return, whichever is earlier. Credit claimed after that is time-barred for that year.
Can I claim ITC on goods received in instalments?
Where goods are received in lots or instalments against a single invoice, the credit is available only on receipt of the last lot or instalment, under the first proviso to section 16(2). So credit is deferred until the final part of that supply is received, not taken on the first delivery.
Is ITC allowed if I have the invoice but not the goods?
No. Section 16(2)(b) requires the recipient to have received the goods or services. Holding the tax invoice is not enough on its own; without receipt of the underlying supply the credit is not admissible, which is a common ground for denial in scrutiny.
Can I claim ITC on tax the supplier never paid?
No. Section 16(2)(c) requires that the tax charged has actually been paid to the government. If the supplier collected the tax but did not deposit it, the recipient's credit is at risk, which is why matching against GSTR-2B and supplier compliance matters for protecting the claim.
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How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 16 September 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
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