What it means
ITC is what makes GST a tax on value added. Section 16 of the CGST Act allows the credit when you hold a tax invoice, have received the goods or services, the supplier has paid the tax and filed their return, the invoice shows in your GSTR-2B, and you file your own return. Some purchases are blocked by section 17(5), for example food and beverages and most motor cars.
Example
Shree Lakshmi Hardware, Bengaluru in October 2026:
| Line | Amount |
|---|---|
| GST on sales (output tax) | ₹54,000 |
| GST on purchases shown in GSTR-2B (ITC) | ₹36,000 |
| GST paid in cash | ₹18,000 |
If one supplier’s bill of ₹40,000 + ₹7,200 GST is missing from GSTR-2B, the ITC that month drops to ₹28,800 and cash tax rises to ₹25,200.
Common mistakes
- Claiming credit from your purchase register instead of GSTR-2B.
- Not paying a supplier within 180 days. The credit must then be reversed with interest until you pay.
- Missing the time limit: ITC for a year must be claimed by 30 November of the next year or the annual return date, whichever is earlier.
- Claiming blocked credits such as staff meals.
In MyRecords
MyRecords works out ITC from your purchase bills, shows it in an ITC register by month, supplier and bill, matches it against the GSTR-2B file you download from the portal, and fills GSTR-3B table 4, including the section 17(5) reversal. Fetching GSTR-2B straight from the portal is available once you connect a GST Suvidha Provider account.