Input tax credit is the GST you paid on purchases that you set off against the GST you owe on sales. It is also where most monthly GST problems start. The credit you claim in GSTR-3B has to be supported by your books and by GSTR-2B, the statement the portal builds from your suppliers' filings. When the three disagree, credit gets lost or a notice arrives.
This guide sets out the monthly reconciliation we run for clients: why GSTR-2B decides the claim, how to sort every purchase into four buckets, which credits are blocked or must be reversed, and what to do when the portal flags a mismatch.
Why GSTR-2B decides your claim
Section 16(2) of the CGST Act lists the conditions for claiming input tax credit. All of them must be met:
- You hold a tax invoice or debit note from a registered supplier.
- The supplier has reported the invoice in GSTR-1 or IFF, and it appears in your GSTR-2B.
- You have received the goods or services.
- The supplier has paid the tax to the government.
- You have filed your own GSTR-3B.
The second condition is why GSTR-2B matters. If a supplier has not filed, the invoice is not in your GSTR-2B and the credit is not claimable yet, however genuine the purchase.
GSTR-2A against GSTR-2B
GSTR-2A is a running view of what your suppliers have reported, and it changes as they file or amend. GSTR-2B is the statement of credit available to you for a return period. The portal drafts it on the 14th of the next month. The claim in GSTR-3B is tested against GSTR-2B, so that is the document to reconcile against. GSTR-2A is still useful for chasing suppliers during the month.
IMS: act on every invoice before GSTR-2B is final
The Invoice Management System has been live on the GST portal since 1 October 2024. Every invoice, debit note and credit note a supplier uploads lands in IMS, and your action on it decides what goes into GSTR-2B.
- Accept: the credit flows into GSTR-2B.
- Reject: the credit stays out, and the supplier must correct the record in GSTR-1A or a later GSTR-1 or IFF.
- Pending: the record is held for a later period. Pending is not allowed for some documents, such as original credit notes.
Records you take no action on are treated as accepted. That is the trap: a wrong or duplicate invoice left alone becomes credit in your GSTR-2B, and claiming it is your problem later. If you change actions in IMS, you can recompute GSTR-2B before filing GSTR-3B.
The four-bucket reconciliation
Match your purchase register against GSTR-2B at invoice level. We use four keys: supplier GSTIN, invoice number, invoice date and taxable value. Every record then falls into one of four buckets.
| Bucket | What it means | What to do |
|---|---|---|
| Matched in books and GSTR-2B | Supplier filed and the figures agree | Claim, unless the credit is blocked |
| In GSTR-2B, not in books | An invoice you have not booked, or one that is not yours | Book it if genuine; reject it in IMS if not |
| In books, not in GSTR-2B | Supplier has not filed, or used a wrong GSTIN | Do not claim yet; follow up with the supplier |
| Amounts differ | Supplier reported a different value or tax | Claim what both agree on; get the supplier to correct the rest |
Suppliers often write the same invoice number differently, for example with or without a prefix and year. For high-volume purchases we add fuzzy matching on invoice numbers so these are not wrongly parked in the unmatched buckets. Many firms, including ours, also allow a small rounding tolerance of a few rupees when matching tax amounts. That is a working practice, not a rule in the law.
Do this by the 14th, when GSTR-2B is drafted, and finish before the GSTR-3B due date: the 20th of the next month for monthly filers, and the 22nd or 24th after the quarter under QRMP. You then know which suppliers are holding up your credit while there is still time to call them.
A worked example: one month, ten invoices
A trading company books nine purchase invoices for a month, and GSTR-2B shows one more. Rates are at the current slabs of 5% and 18%, in force since 22 September 2025.
| Invoice | Tax in books (₹) | In GSTR-2B? | Bucket | Credit claimed (₹) |
|---|---|---|---|---|
| 1. Raw material, 18% | 18,000 | Yes, same amount | Matched | 18,000 |
| 2. Packing, 18% | 9,000 | Yes, same amount | Matched | 9,000 |
| 3. Goods, 5% | 10,000 | Yes, same amount | Matched | 10,000 |
| 4. Software, 18% | 7,200 | Yes, same amount | Matched | 7,200 |
| 5. Staff lunch catering, 18% | 5,400 | Yes, same amount | Matched but blocked, s.17(5) | 0 |
| 6. Freight, 18% | 14,400 | No | In books, not in 2B | 0 (held) |
| 7. Repairs, 18% | 4,500 | No | In books, not in 2B | 0 (held) |
| 8. Goods, 18% | 10,800 | Yes, shows 9,000 | Amounts differ | 9,000 |
| 9. Goods, 5% | 1,000 | Yes, same amount | Matched | 1,000 |
| 10. Unknown supplier, 18% | Not booked | Yes, shows 2,700 | In 2B, not in books | 0 (rejected in IMS) |
| Total | 80,300 | 54,200 |
Of ₹80,300 of tax in the books, ₹54,200 goes into GSTR-3B. The ₹5,400 on catering is blocked and never claimable. The ₹20,700 on invoices 6, 7 and the unreported part of 8 is not lost: it waits until the suppliers file or correct, and is claimed in a later month within the time limit. Invoice 10 is rejected in IMS until someone can show it belongs to the business.
Blocked credits under section 17(5)
Some credit is blocked even when every section 16 condition is met and the invoice sits in GSTR-2B. Credit is generally not available on:
- Motor vehicles for carrying up to 13 persons, including the driver, except in specified cases
- Food and beverages, and outdoor catering
- Beauty treatment, health services, life and health insurance, except where specified
- Membership of clubs, health and fitness centres
- Travel benefits to employees on vacation, such as leave travel
- Works contract and goods or services used to construct immovable property on your own account
- Goods or services for personal use
- Goods lost, stolen, destroyed, written off, or given as gifts or free samples
Tag these expense heads in your accounting software so they never reach the claim. Our accounting service sets this up in the ledger, and it works the same way in Zoho Books or Tally.
Reversals: the 180-day rule and common credit
Unpaid suppliers: Rule 37
If you do not pay a supplier the invoice value and tax within 180 days of the invoice date, you must reverse the credit with interest. Once you pay, you can claim it again. Run a supplier ageing report every month and flag anything approaching 180 days.
Common credit on exempt supplies: Rules 42 and 43
If you make both taxable and exempt supplies, credit on inputs and input services used for both (Rule 42), and on capital goods used for both (Rule 43), cannot all be kept. The part that relates to exempt supplies has to be reversed, using the method the rules set out. Any business that makes exempt supplies alongside taxable sales should check this every period rather than leave it to year end.
The time limit to claim credit
Credit 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 purchases, that means by 30 November 2026 at the latest. If you file your GSTR-9 annual return before then, the window closes on that date instead.
This is why the held bucket matters. An invoice that sits unreported in GSTR-2B for months can run out of time. Chase suppliers early, and before the annual return, check what is still pending.
DRC-01C: when the portal flags excess credit
If the credit you claim in GSTR-3B exceeds what GSTR-2B shows beyond a threshold, the portal sends an intimation in Form DRC-01C under Rule 88D. You must respond in Part B of the form within 7 days: either pay the difference with interest through DRC-03, or explain it, for example as credit carried from an earlier period.
If you do not respond, your next GSTR-1 or IFF is blocked. Interest on credit wrongly availed and utilised is 18% a year. A monthly reconciliation is the cheapest way to avoid DRC-01C altogether. If one has already arrived, our GST notice reply team drafts the Part B response.
Make it a monthly habit
- Download GSTR-2B and review IMS as soon as the draft is generated on the 14th.
- Match invoice by invoice and sort every record into the four buckets.
- Strip out blocked credits and reverse anything past 180 days unpaid.
- Send the held list to suppliers with the invoice numbers and amounts.
- Claim only the supported figure in GSTR-3B, and carry the rest forward on a tracker.
Regikart runs this as part of GST return filing, with the GSTR-2B and IMS review included every period. If you are newly registered, start the habit from your first return: see our GST registration service. Call or WhatsApp +91 70444 94804, or contact us.
Frequently asked questions
What is ITC reconciliation in GST?
It is the monthly check that the input tax credit in your books agrees with GSTR-2B, the statement of credit the portal builds from your suppliers' filings, before you claim it in GSTR-3B. Each invoice is matched on supplier GSTIN, invoice number, date and value, and every difference is followed up.
Can I claim ITC if the invoice is not in GSTR-2B?
No. Under section 16(2) of the CGST Act, the invoice must appear in your GSTR-2B. Hold the credit, ask the supplier to file or correct their GSTR-1 or IFF, and claim it in a later month once it appears, within the time limit.
What is the difference between GSTR-2A and GSTR-2B?
GSTR-2A is a running view of what suppliers have reported and changes as they file or amend. GSTR-2B is the statement of credit available for a return period, drafted on the 14th of the next month. Your GSTR-3B claim is tested against GSTR-2B.
What happens if I take no action in IMS?
Records you do not act on are treated as accepted when GSTR-2B is generated. A wrong or duplicate invoice left alone becomes credit in your GSTR-2B. Review IMS every period and reject or keep pending anything you cannot support.
What is the last date to claim ITC for FY 2025-26?
Credit 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 purchases, that means by 30 November 2026 at the latest, and earlier if you file GSTR-9 before then.
Do I lose ITC if I pay my supplier late?
Not permanently. If you do not pay the invoice value and tax within 180 days of the invoice date, you must reverse the credit with interest. Once you pay, you can claim it again.
Which input tax credits are blocked?
Section 17(5) blocks credit on items such as most motor vehicles for up to 13 persons, food and beverages, club and fitness memberships, works contracts for your own immovable property, personal-use goods, and goods lost, stolen, destroyed, written off or given as gifts or free samples.
How do I reply to a DRC-01C intimation?
Reply in Part B of the form within 7 days. Either pay the excess credit with interest through DRC-03, or explain the difference, for example credit carried from an earlier period. If you do not respond, your next GSTR-1 or IFF is blocked.
Supplier ne GSTR-1 file nahi kiya, toh mera ITC ka kya hoga?
The credit will not appear in your GSTR-2B, so you cannot claim it yet. Keep it on your held list, ask the supplier to file, and claim it in the month it appears. Watch the time limit: for FY 2025-26 purchases it closes on 30 November 2026 at the latest.
About the author
CA Deepak Jaiswal
Founding Partner, FCA at Regikart. Want to discuss this in the context of your business?