The quick answer
Input tax credit (ITC) is the eligible credit of input tax used under the GST rules. It is not a refund of every expense or an automatic credit for every purchase. Registration scheme, documents, receipt, supplier reporting, business use, blocked-credit rules and time limits all matter.
Keep the actual purchase evidence and reconcile it with the applicable GST statement. Your accountant should assess eligibility, required reversals and permitted utilisation. A software purchase entry helps organise the evidence; it does not establish the legal credit claim.
Before you begin
- The taxpayer’s valid registration and scheme.
- Supplier tax invoices, receipt evidence and business-use facts.
- Relevant GSTR-2B/IMS data, payment records and prior-credit adjustments.
See how the pieces connect
Evidence
Retain the tax invoice and receipt records.
Matching
Compare the supplier information with the books.
Eligibility
Apply conditions, restrictions and reversals.
Utilisation
Use eligible credit under the tax-component rules.
Work through the steps
Check whether the scheme permits credit
A composition taxpayer does not have the same ITC entitlement as a regular taxpayer. Establish the valid scheme before modelling purchase GST as available credit.
Retain a valid supporting document
Check the supplier and recipient particulars, invoice number, date, description and tax components. Keep evidence of the actual goods or services received. A payment screenshot alone is not the complete credit record.
Reconcile supplier-reported information
Compare the books with current GSTR-2B and applicable IMS records. Identify missing or mismatched invoices and follow up with suppliers. Review statements in the correct GSTIN and period.
Apply the eligibility conditions
Consider the statutory conditions, business use, blocked credits and relevant time limits. Some purchases can be partly eligible or ineligible. A statement entry is not permission to ignore these restrictions.
Record required reversals and later changes
Check credit notes, payment conditions and other reversal or re-availment requirements with the accountant. Maintain a record of why credit was included, excluded or adjusted so it is not claimed twice.
Use the correct utilisation calculation
Keep CGST, SGST, IGST and any cess distinct and follow their permitted utilisation rules. Assess cash-only liabilities separately. Do not subtract one combined purchase-tax total from all output liabilities.
A worked example
Eligibility changes the credit amount
Illustrative amounts only. The actual treatment depends on the statutory conditions and documents.
| Purchase-tax record | Review finding | Amount considered |
|---|---|---|
| ₹1,800 on supported business purchase | All assumed conditions satisfied | ₹1,800 illustrative eligible credit |
| ₹900 on a restricted expense | Eligibility restriction applies | Exclude or treat as advised |
| ₹360 on mismatched invoice | Supplier/record difference unresolved | Investigate before claim |
The purchase tax total is ₹3,060, but it is not automatically the available credit. Evidence, restrictions and unresolved differences determine the reviewed claim.
Common mistakes to avoid
- Claiming every purchase-tax amount as eligible credit.
- Ignoring business-use or blocked-credit restrictions.
- Treating the same invoice’s later appearance as another purchase.
- Combining tax components without checking utilisation rules.
Questions you might have
Does an invoice in GSTR-2B guarantee ITC?
No. You must still satisfy the applicable credit conditions and review restrictions or reversals.
Does Dukanam decide legal eligibility?
No. Its supported purchase and GST preparation records help organise and reconcile data. The legal claim requires the appropriate review.
Dukanam
A smart, low-cost choice for small-business GST billing
Dukanam brings billing, purchases, stock, customer balances, payments and reports together. It is built for Indian small businesses that want clear records without a complicated setup.
Best suited to shops that want connected everyday billing and bookkeeping, web and mobile access, and nine product languages. Choose the plan that includes the features you need.
GST-aware billing and preparation depend on your plan. Review records before filing on the GST portal; Dukanam does not directly submit GST returns, government e-invoices or e-way bills.
Current plans with GST preparation
- Advanced Plan₹299.00 per month
Check annual prices, limits, applicable taxes and checkout terms. Paid plans do not include a free trial.
Sources and further reading
Official rules and portal screens can change. Use the linked authority for the current requirements; the figures in our worked examples are illustrative.