Input Tax Credit Under GST: Blocked Credits, GSTR-2B

Input tax credit (ITC) lets a registered business reduce the GST it pays on sales by the GST it has already paid on purchases. Used well, it means GST is a tax only on the value you add. Used carelessly, it is the single biggest source of GST notices, interest and penalties.

The basic conditions (section 16)

You can claim ITC on goods and services used in the course or furtherance of business only if all of these are met:

You hold a tax invoice or debit note from a registered supplier.
The invoice appears in your GSTR-2B. The supplier must have reported it in GSTR-1/IFF, and you must not have rejected it on IMS.
You have received the goods or services. Goods delivered to a third party on your direction count.
The supplier has actually paid the tax to the government (through their GSTR-3B).
You have filed your own return (GSTR-3B).

For goods received in lots, ITC is available on receipt of the last lot.

GSTR-2B and IMS: the matching rule

Your eligible ITC is essentially what appears in GSTR-2B, which is generated after your actions on the Invoice Management System (IMS).
On IMS you can accept, reject or keep pending each supplier invoice. Rejected invoices don’t flow into GSTR-2B. Pending invoices can be carried forward, within limits.
Claiming more ITC in GSTR-3B than GSTR-2B shows is flagged automatically (the DRC-01C intimation for ITC mismatch). The portal is moving towards locking the ITC table to GSTR-2B.

Best practice: reconcile your purchase register with GSTR-2B every month, and chase suppliers who haven’t uploaded invoices before you file GSTR-3B.

Time limit to claim ITC (section 16(4))

ITC for a financial year must be claimed by 30 November of the following year, or the date you file the annual return, whichever is earlier. For FY 2025-26 that is 30 November 2026. ITC not claimed by then is lost.

The 180-day payment rule

If you don’t pay the supplier (value plus GST) within 180 days of the invoice date, you must reverse the ITC, with interest. You can re-claim it when you finally pay. This catches businesses with long credit cycles.

Blocked credits: section 17(5)

ITC is not available on the following, even for business use:

Blocked item	Exceptions
Motor vehicles for passengers with up to 13 seats (including the driver), and their repairs, insurance and servicing	Allowed if you are in the business of further supply of vehicles, passenger transport, or driving training, or for goods transport vehicles
Vessels and aircraft	Similar business-use exceptions
Food and beverages, outdoor catering, beauty treatment, health services, cosmetic surgery	Allowed if provided as part of the same taxable outward supply, or if obligatory for employers under any law
Club, health and fitness centre memberships	—
Travel benefits to employees (leave or home travel concession)	—
Life and health insurance	Allowed where obligatory for employers under law
Works contract for constructing immovable property (other than plant and machinery)	Allowed for further supply of works contract
Goods or services for construction of immovable property on your own account, even when used in business, e.g. building an office	Plant and machinery are allowed
Goods lost, stolen, destroyed, written off, or given as gifts or free samples	—
Tax paid under composition	—
Goods or services for personal consumption	—
Tax paid on account of fraud, wilful misstatement or suppression	—

Common example: a company car for directors: GST on the purchase, repairs and insurance is blocked.

When ITC must be reversed

Exempt and taxable supplies together: reverse the ITC attributable to exempt supplies under Rules 42 and 43, with a common credit apportioned by turnover.
Non-payment within 180 days (above).
Credit notes from suppliers reduce your ITC.
Capital goods sold within their useful life: pay the higher of the ITC reversal or the tax on the transaction value.
Cancellation of registration: reverse the ITC on stock and capital goods.

Other useful rules

Rule 86B: if taxable value exceeds ₹50 lakh in a month, at least 1% of output tax must generally be paid in cash, subject to exceptions (e.g. ₹1 lakh+ income tax paid, refunds received).
ITC on capital goods: you can’t claim both ITC and depreciation on the GST portion for income tax.
Electronic credit ledger blocking (Rule 86A): officers can block ITC suspected to be ineligible for up to a year.

Frequently asked questions

Can I claim ITC on a car bought for my business?
Generally no, for passenger vehicles up to 13 seats, unless you are in the business of selling or renting vehicles, passenger transport or driver training.

My supplier filed GSTR-1 late. Can I still claim the ITC?
Yes. It will appear in a later GSTR-2B, and you can claim it in that month’s GSTR-3B, as long as it is within the 30 November limit.

Can I claim ITC on office rent?
Yes. GST on rent of commercial premises used for business is eligible ITC, including tax you pay under reverse charge on rent from an unregistered landlord.

Leaving ITC on the table, or facing ITC mismatch notices? Garvita Jain & Co. runs monthly GSTR-2B reconciliations, identifies blocked and reversible credits, and helps you claim every rupee you’re entitled to, safely. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.

This article is general information based on the law as of November 2026 and is not professional advice.

Sources

Official

Professional / CA publications

Input Tax Credit Under GST: Eligibility, Blocked Credits and GSTR-2B Matching