How ITC works
ITC (Input Tax Credit) is the GST you paid on business purchases. You can deduct it from the GST you collected on sales.
Net GST = Output GST − Input GST
Note: Only eligible business expenses with valid GST invoices qualify for ITC. Personal expenses and blocked items cannot be claimed.
How to Calculate ITC
4 simple steps
Enter Output GST
GST collected on your sales
Enter Input GST
GST paid on your purchases
View Net GST
See your net GST payable after ITC
See Savings
Know how much you save with ITC
What is Input Tax Credit (ITC)?
Understand how ITC saves you money
ITC is the GST you paid on business purchases that you can deduct from the GST you collected on sales. It prevents double taxation and reduces your actual tax payment.
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🎉 You saved ₹18,000 (60%) by claiming ITC!
Without ITC, you would pay ₹30,000. With ITC, you only pay ₹12,000.
ITC Eligibility Rules
What can and cannot be claimed
Eligible for ITC
- ✓Raw materials & inventory
- ✓Machinery & equipment
- ✓Office supplies & furniture
- ✓Professional services
- ✓Rent (with GST invoice)
- ✓Transportation costs
Blocked Credits
- ✗Motor vehicles (most cases)
- ✗Food & beverages
- ✗Club memberships
- ✗Life/health insurance*
- ✗Travel & vacation
- ✗Personal consumption
*Some exceptions apply. See Section 17(5).
Prerequisites for Claiming ITC
- • Valid GST tax invoice
- • Supplier is GST registered
- • Goods/services received
- • Claimed in GST return
🚫 3 Common ITC Mistakes to Avoid
Missing Tax Invoice
A bank statement or payment receipt is not enough. You strictly need a valid GST Tax Invoice from your supplier.
The 180-Day Rule
If you don’t pay your supplier within 180 days of the invoice date, you must reverse the ITC you claimed, along with interest.
Supplier Non-Filing
If your supplier doesn’t file their GSTR-1, the credit won’t appear in your GSTR-2B. You strictly cannot claim full ITC for these invoices.
ITC Calculation Formula
Simple math, big savings
Net GST Payable = Output GST − Input GST
Output ₹30,000 − Input ₹18,000
= Pay ₹12,000
Output ₹10,000 − Input ₹18,000
= Pay ₹0, Carry ₹8,000
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Frequently Asked Questions
Common questions about Input Tax Credit
What is Input Tax Credit (ITC)?
ITC is the GST you paid on business purchases (raw materials, services, equipment) that you can deduct from the GST you collected on sales. It prevents tax cascading and reduces your overall tax burden. For example, if you collected ₹30,000 GST and paid ₹18,000 GST on purchases, you only pay ₹12,000 to the government.
How is ITC calculated?
The formula is simple: Net GST Payable = Output GST - Input GST. If your Input GST exceeds Output GST, you have Excess ITC that can be carried forward to the next period or claimed as a refund in certain cases.
What expenses are eligible for ITC?
Eligible expenses include: raw materials, machinery, office supplies, professional services, rent, and transportation – as long as they're used for business purposes and you have valid GST invoices from registered suppliers. Personal expenses and certain blocked items are not eligible.
What happens if ITC exceeds Output GST?
When your Input GST is higher than Output GST, you have 'Excess ITC'. This excess credit is carried forward to the next tax period. In some cases (like exports), you may be eligible for a refund. You don't pay any GST for that period.
What are blocked credits under GST?
Blocked credits are expenses where ITC cannot be claimed, including: motor vehicles (except for specific businesses), food and beverages, club memberships, life/health insurance (with exceptions), travel and vacation, and personal consumption. These are defined under Section 17(5) of CGST Act.